BlackBerry maker dials down profit expectations

 

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By Reuters

Posted on 11 Feb 2009 at 15:27

Research In Motion says its quarterly earnings and gross margin will come in at the low end of expectations, even as subscriber growth topped forecasts.

The news sent shares of the BlackBerry maker tumbling by 12%.

Analysts report RIM is attracting new subscribers with smartphones such as the touchscreen Storm or high-end Bold, but its existing customers were not upgrading their devices as frequently in the weak economic climate.

"You probably see big financial institutions cutting costs... and the consumer is just not getting a new handset," says James Cordwell, an analyst with Atlantic Equities in London. "It just shows they're not immune to the economic slowdown like anybody else."

RIM blamed a variety of factors, including product mix, lower inventory levels and a higher ratio of new subscriber sales to upgrade and replacement sales, for subscriber growth outperforming revenue and earnings in the Christmas quarter.

The company says it now expects net subscriber account additions in the quarter that ended 28 February to be 20% higher than the 2.9 million additions it previously forecast.

But earnings per share and gross margin would come in at the low end of its forecast range, and revenue would be at or near the mid-point.

In December, RIM had forecast quarterly revenue between $3.3 billion and $3.5 billion, with earnings per share of 83 cents to 91 cents. Both were above Wall Street's estimates at the time, and analysts ratcheted up their forecasts and the stock surged, gaining more than 40% this year.

Today's outlook signals RIM could miss the mean analyst forecast for earnings per share of 86 cents.

Avian Securities analyst Matthew Thornton says RIM is probably selling "a lot more Storms which carry a lower gross margin and probably a lot less of its older legacy products, which carry much higher margins."