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RIM Shares Get Rattled

Shares drop after a soft quarter and news of a formal SEC inquiry.

Updated from April 11

Research In Motion


shares slumped Thursday, a day after the company just missed fourth-quarter estimates but spooked investors with news that an informal inquiry by the

Securities and Exchange Commission

had become a formal investigation.

Shares were recently off $11.73, or 8%, to $134.29.

The company said Wednesday it believes the focus of this investigation is substantially the same as the informal inquiry, which has focused on the company's stock-option practices.

RIM is in the middle of completing restatements for fiscal 2007, and continues to believe the impact to past operating results will be "immaterial."

For the fourth quarter, net income rose to $187.9 million, or 99 cents a share, from $18.4 million, or 10 cents a share a year earlier.

Revenue jumped 66% to $930.4 million from $561.2 million a year earlier.

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Analysts expected the company to earn $1 a share on revenue of $935.4 million.

RIM's results could come as a disappointment to some investors who were looking for a

blowout quarter. But the company continued to post some strong subscriber numbers.

Approximately 1.02 million BlackBerry subscriber accounts were added in the fourth quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 8 million, said the company.

Pearl, the consumer-targeted phone that RIM launched last year, continues to do well, said Jim Balsillie, CEO of RIM. "Nearly 80% of Pearl purchases in

the last quarter were brand new subscribers," he told analysts during the company's conference call.

But about 20% to 30% of Pearl handsets sold in the quarter were without attached data plans, a lucrative incremental source of revenue for cell phone companies.

Balsillie allayed fears that RIM could be potentially heading for a slowdown. "We feel we are just entering the second innings of a nine-inning game," he said, "and we see every aspect of the business turbo-charging ahead."

RIM's guidance though remained cautiously optimistic. For the current, or first quarter, RIM expects revenue of $1.025 billion to $1.075 billion, slightly above Thomson Financial expectations of $1 billion.

The company forecasts EPS of 99 cents to $1.07, bracketing the current Street estimate of $1.04 a share.

Subscriber account additions in the first quarter are expected to be approximately in the range of 1.12 million to 1.15 million.