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High Bar Hits RIM

A boost to third-quarter guidance inspires profit-taking.

Updated from 4:55 p.m. EDT

Shares of BlackBerry maker

Research In Motion


dipped as the company failed to blow past analysts' expectations for the second quarter -- even as it guided higher for the current quarter.

Investors, who have come to expect surging quarterly growth from RIM on cue, sold the stock in after-hours trading. Shares of RIM were off $1.90, or 1.8%, to $98.64 in recent extended trading.

Net income for the second quarter was $287.7 million, or 50 cents a share, up from net income of $140.2 million, or 25 cents a share, in the same quarter last year.

Analysts polled by Thomson Financial were expecting earnings of 50 cents a share.

Revenue for the quarter was $1.37 billion, up 108% from $658.5 million in the same quarter of last year. Analysts were expecting revenue of $1.36 billion.

The revenue breakdown for the quarter was approximately 78% for devices, 15% for service, 4% for software and 3% for other revenue.

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The usual summer slowdown did not affect RIM's results thanks to a number of new devices including a BlackBerry 8830 World edition smartphone and the Curve 8310, and continued demand for the Pearl Pearl 8100 and the Curve 8300, said RIM.

Approximately 1.45 million BlackBerry subscriber accounts were added in the quarter and over 3 million devices were shipped. So far, RIM has shipped nearly 20 million phones, and the company's phones are available from 325 carriers worldwide.

RIM also crossed the 10 million subscriber mark as total BlackBerry subscriber account base at the end of the second quarter was approximately 10.5 million.

International markets represent approximately 32% of RIM's subscriber account base, and the percentage of subscribers coming from non-enterprises increased to over 30% of the company's base.

For the third quarter, RIM expects revenue of $1.6 billion to $1.67 billion. Subscriber account additions in the third quarter are expected to be approximately 1.65 million, and the company forecast earnings in the range of 59 cents to 63 cents a share.

Analysts were expecting revenue of $1.51 billion and EPS of 55 cents a share.

Despite some analyst fears, RIM managed to keep the average selling price of its devices in the second quarter higher than expected, at approximately $353. In the third quarter, the company expects the average selling price for a device to decline to $340.

Service revenue in the second quarter was $201 million, or 15% of overall revenue. Software revenue was $57 million, or 4% of revenue. Other revenues from repairs and the sale of accessories totaled $36 million, or 3% of revenue.

Gross margin for the first quarter was just over 51%, in line with the company's guidance.

RIM ended the quarter with approximately $1.7 billion in cash, cash equivalents and investments, up $166 million from the prior quarter. The cash stockpile has drawn management attention, Jim Balsillie, CEO of RIM told analysts in a conference call.

"There will come a time in the not too distant future when we have to come up with a cash strategy, whether it is buybacks or dividends or whatever is appropriate, but it is not something that's fully thought through," said Balsille. "It is something that has been put on my agenda to address with the board and the audit committee, and once we get greater clarity than that, we'll do it."