Updated from 5:06 p.m. EDT

Ontario, Waterloo-based

Research In Motion

(RIMM)

reported a fiscal first quarter 2003 net loss of $10.8 million, or 14 cents a share, on revenue of $71.6 million, narrowly beating its own reduced guidance and Wall Street expectations.

The wireless device and services company

pulled down its expectations after reporting earnings in April, slammed by the slowdown in IT spending with no recovery in enterprise market spending. It's also hurt by the slower-than-expected rollout of next generation wireless networks such as general packet radio service (GPRS), which it has just begun to serve.

The company's revised guidance was for revenue in the low-$70 million range, from a more ambitious $75 million to $80 million range.

Wall Street originally expected the company to log a loss of 12 cents a share, but revised it to a 19-cents-a-share loss, according to a Thomson Financial/First Call poll.

RIM ended the day down 33 cents, or 3.06% to $10.46. But an after-hours rally erased those losses, and the stock was up $1.14, or 10.57% to $11.93.

The company reported a sequential gain on revenue of 8% from $66.1 million in the previous quarter, but a 7% dive from $77 million in the same period last year. On a more upbeat note, the company logged an additional 34,000 subscribers, bringing the total to 355,000 as of the end of the quarter. It also saw gains from corporate customers running its enterprise software, about 6,100 in total, up from 5,000 in February.

Net losses also significantly grew, by about 26%, from last quarter's $8.6 million loss, or 11 cents a share.

Newer products such as the BlackBerry 5810, a device that runs on GSM/GPRS networks and adds phone functions, as well as other product updates helped grow gross margins. Gross margins saw sequential gains to 43.5%, compared with 42.1% in the prior quarter, and 38.1% last year, due to increased margins on handhelds and "changes in the revenue mix" primarily from service revenues comprising a higher percentage of the revenues this quarter compared with last. Average selling prices for its handhelds were $445, compared to $380 in the fiscal fourth quarter.

Compared with others in the handheld and wireless data services field, RIM's margins weigh heavily in its favor, say analysts. "They have been a fairly unique offering and that has allowed them to maintain reasonably high margins," said J.P. Morgan analyst Paul Coster. "Having said that, our hypothesis is that in time they will be subject to more head-on competition and start bringing down margins on the device side."

Coster is referring to well-funded start-up

Good Technologies

, which recently launched a similar device and is embroiled in a lawsuit with RIM. Last month, RIM filed a patent infringement suit against the start-up claiming Good's email technology infringes on RIM's patents. Oddly, Good Technologies pre-empted the suit in May, claiming RIM's patents were invalid.

RIM ended the quarter with $616 million in cash and marketable securities, down $28.6 million sequentially, compared with $644.6 million last quarter.

Looking ahead, the company reduced its full year sales guidance to a "more attainable" $350 million to $370 million, from its earlier $375 million to $425 million target for fiscal 2003, as carriers begin to iron out the wrinkles in providing voice and data services on RIM's converged devices. They maintained guidance on a net loss of 30 cents to 45 cents for the full year, ahead of current Wall Street expectations of 52 cents.

The company maintained sales guidance on the second quarter of $75 million to $80 million, but said it would lose less on a per-share basis, from 15 cents to 20 cents, up from earlier guidance of 18 cents to 23 cents. Third quarter sales are expected to be in line with expectations of $90 to $100 million, and net losses of 7 cents to 12 cents a share. RIM chief financial officer Dennis Kavelman said the company expects to be profitable in the fourth quarter, but said the company "does not have clear visibility" in the fourth quarter.

Cash burn is expected to grow to $40 million in the next quarter and taper off to $20 million to $30 million in its fiscal third and fourth quarter, bringing its fiscal year end cash position to $520 million.

Gross margins are expected to continue to march forward putting to shame the rest of the sector's players, at least for the time being, reaching 45% to 48% in the next quarter. Consider Palm's 34.8% margin in the last quarter and investors will begin to see why the handheld company is pulling out all stops to gun after the enterprise market, where RIM currently dominates.