RIM Still Reeling

Updated from 4:57 p.m. EDT

Research In Motion ( RIMM) may have put a dangerous patent suit behind it, but troubled times are continuing for the BlackBerry maker.

The company's fourth-quarter results missed Wall Street's top- and bottom-line expectations. Worse yet, the company forecast disappointing results for its current, first quarter.

On a conference call on Thursday, co-CEO Jim Balsillie acknowledged that the company lost momentum in recent months amid worries that its wireless email service would be shut down in the U.S. as a result of the patent dispute. Additionally, some of RIM's carrier partners have delayed the launch of new handsets, which is leading to slower than expected growth, he said.

But business is picking up, he insisted. New products and investments in international markets should help get RIM's business rolling again, particularly in the second half of this year, he said.

"We're excited about how all aspects of our business are where they need be, or are about where they need be," Balsillie said on the call. "Quite frankly, I think we're on the cusp of another big expansion" in the company's business, he added.

Investors were notably more skeptical of the company's outlook. In after-hours trading following the company's report and call, the company's stock was off $3.95, or 4.7%, to $80.43. Earlier in post-bell trading, the stock sunk as low as 6%.

In the quarter ended March 4, RIM earned $18.4 million, or 10 cents a share, on sales of $561.2 million. That was actually up from the year-ago period, when RIM lost $2.6 million, or a penny a share, on sales of $404.8 million.

In both quarters, legal charges weighed down the company's results. Thanks to a settlement in its patent dispute with NTP, RIM took a $162.5 million charge in the just-completed quarter. Excluding that charge and a related tax benefit, the company would have earned $124.6 million, or 65 cents a share, in the just-completed quarter.

In the same period last year, the company would have earned $140.1 million, or 71 cents a share, without the litigation charge.

On this basis, analysts polled by Thomson First Call were expecting the company to earn 67 cents a share in the quarter on $567.2 million in sales. Last month, RIM warned that it wouldn't meet its previous sales and earnings forecast. The company's updated guidance called for earnings of 64 cents to 66 cents a share excluding the litigation charges on sales ranging from $550 million to $560 million.

Looking forward, the company predicted that it would earn 60 cents to 65 cents a share in the current quarter on sales ranging from $580 million to $610 million.

In contrast, analysts had predicted the company would earn 76 cents a share on $625.6 million in sales in its first quarter. In the same period last year, RIM earned $132.5 million, or 67 cents a share, on $453.9 million in sales.

RIM did not provide a full-year forecast for the 2007 fiscal year. Wall Street's forecast calls for full-year earnings of $3.27 a share on sales of $2.74 billion.

In the just-completed full-year fiscal 2006, RIM earned $382.1 million, or $1.96 a share, on sales of $2.07 billion. In fiscal 2005 the company earned $213.4 million, or $1.09 a share, on sales of $1.35 billion.

Despite the overall dour report, RIM did provide some moderately good news on at least one front: subscribers. The company added 625,000 subscribers to its BlackBerry service in the fourth quarter, which was right in the middle of its expected range of 620,000 to 630,000. And the company expects subscriber growth to pick up in the current quarter, forecasting 675,000 new subscribers for the period.

But even those tidbits could be seen in a negative light. RIM originally predicted last year that it would add 775,000 to 825,000 subscribers in the just-completed quarter. Last month, the company dropped its subscriber-addition target to 620,000 to 630,000, marking the third time it had lowered its expected subscriber gains for the period.

After repeatedly posting disappointing subscriber growth numbers in recent quarters -- and amid a lot of different variables that could weigh on subscriber additions -- RIM decided to be conservative in its subscriber forecast, CFO Dennis Kavelman said on the conference call.

Subscriber additions dropped to as few as 40,000 a week in February, immediately prior to the NTP settlement, Kavelman said. But in the weeks following the settlement, they have jumped up to about 50,000 a week, which was about the rate RIM was running at last fall before the patent case started coming to a head.

We'll see how the growth trends play out," Kavelman said. "But obviously, we're extremely encouraged by the overall momentum."

Shares of RIM closed regular trading on Thursday down $1.18, or 1.4%, to $84.38

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