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RIM Sinks as Forecast Falls Flat

Priya Ganapati

SAN FRANCISCO -- Shares of BlackBerry maker Research in Motion(RIMM) plunged after the company missed Wall Street's first-quarter expectations and guided below profit estimates for the second quarter.

Shares of RIM sank 8.5% to $130.18 in premarket trading Thursday.

RIM said first-quarter profit rose to $482.5 million, or 84 cents a share, compared with a net income of $223.2 million, or 39 cents a share, a year earlier.

Revenue rose 107% to $2.24 billion from $1.08 billion a year ago.

Analysts polled by Thomson Reuters were expecting revenue of $2.27 billion and earnings of 85 cents a share.

Approximately 2.3 million BlackBerry subscriber accounts were added in the quarter, bringing the total BlackBerry subscriber account base to more than 16 million. RIM had forecast net subscriber account additions to be approximately 2.2 million during the quarter.

Nearly 60% of the subscriber additions in the quarter came from non-business users and they now represent about 40% of RIM's total user base, the company said.

But it was the spike in expenses and a decline in gross margins that had analysts on the company's conference call worried.

Gross margin for the quarter fell to 50.7% from 51.8%, the same quarter a year ago.

The company's selling, general and administrative expenses grew 22%, compared to expectations that pegged the rise at around 17% to 18%. That means the company spent about $10 million more than it had expected, pointed out Citigroup analyst Jim Suva.

RIM tried to allay concerns and suggested the increased spending is on marketing in anticipation of new product launches later this year.

So far, RIM had announced just the BlackBerry Bold, a 3G phone with strong multimedia features. However, many analysts believe that the company may be also readying to launch newer phones including a touch-screen BlackBerry, fresher versions of its Pearl phone and a flip phone.

Meanwhile, the launch of the BlackBerry Bold is likely to be delayed from the late July or early August that most company watchers had been expecting, according to a report Wednesday by Mike Abramsky, an analyst with RBC Capital Markets.

RIM did not offer a specific date for launch but company co-CEO Jim Balsillie said the device will be ready for release this summer. "We have made the Bold available to carriers for testing," he said.

The impact from the phone's sales are likely to be felt in the third quarter, rather than the current one, the company said.

For the second quarter, RIM guided revenue in the range of $2.55 billion to $2.65 billion. The company forecast earnings in the range of 84 cents to 89 cents a share.

Analysts were expecting revenue of $2.43 billion and EPS of 90 cents in the quarter.

Net subscriber account additions in the first quarter are expected to be approximately 2.6 million, said RIM.

For the second quarter, RIM expects gross margin at around 50.5%.

RIM's stock had gained about 25% in the last three months, nearly the same as rival Apple(AAPL), even as competitors such as Motorola(MOT) and Nokia(NOK) have lost ground. Shares of Motorola were down about 23% and Nokia shed about 21% during the same period.