RIM Shares Tumble Despite Strong Quarter

Research In Motion, the maker of the BlackBerry mobile e-mail device family, saw its stock fall Thursday even after posting a strong fourth quarter that featured a 65 percent jump in revenue.

The Waterloo, Ontario-based company added more than 1 million new subscribers to its BlackBerry service in the fourth quarter, growth that helped drive revenue to US$930.4 million. Net income was up 54 percent — due in part to comparisons with a year-ago quarter that included substantial legal fees in connection with the patent settlement RIM reached with NTP.

RIM expects its robust growth to continue, saying its revenue for the current quarter would range from $1.025 billion to $1.075 billion.

The black spot on the otherwise sunny earning, however, was the acknowledgment that the company has not yet resolved an inquiry into its handling of stock options dating issues. RIM had previously disclosed a formal Securities and Exchange Commission (SEC) probe into its options dating.

That revelation helped spark a sell-off in RIM shares, with the stock down some 8 percent, or $11.86, to $134.66.

Strong Growth

RIM now has about 8 million subscribers to its hugely popular e-mail service.

Seventy-three percent of its revenue came from hand-held device sales, 19 percent for its monthly service and 5 percent from sales of upgraded software, the company stated.

For all of fiscal 2007, RIM had revenue of $3 billion and shipped some 6.4 million devices.

Lower-end units and more fashionable devices are part of its future strategy, as evidenced by recent offerings such as the BlackBerry Pearl and the 8800. Soon-to-launch products include those code-named “Daytona” and “Cyclone,” which are expected to feature new design forms, more multimedia capabilities and a wider range of colors to help the devices appeal to non-business users, who make up the majority of current customers.

Competition in the consumer segment is about to get considerably stiffer, with the pending arrival of the Apple iPhone and more smartphones from other competitors also trying to keep customers from defecting to the first cell phone from the iPod and PC maker.

Lingering Issue

RIM has already said it would restate some $250 million of past results after its internal investigation. However, the company’s difficulty in putting the options issues to rest are a reason for concern.

“The option overhang will likely get worse before it gets better,” ThinkEquity Partners analyst Jonathan Hoopes told the E-Commerce Times.

RIM will likely continue to grow sales as it has recognized the need to move beyond its enterprise base to offer more consumer-friendly products, Gartner analyst Ken Dulaney stated.

“RIM will help usher in the next phase of growth for wireless e-mail” with lower-priced devices and more affordable pricing plans, Dulaney told the E-Commerce Times. In addition, other vendors are rolling out products meant to display some of the same design and style innovations of the upcoming iPhone, which will further lift the entire market for smartphones that can handle mobile e-mail.