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Business – RIM profit, outlook top forecasts; shares surge

Susan Taylor

OTTAWA (Reuters) – Research In Motion posted a big jump in profit and issued an even stronger outlook on Thursday, as sturdy demand from holiday shoppers helped the BlackBerry maker fend off the competition.

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Shrugging off fears that Apple and other rivals were eating its lunch, Canada’s top technology company said it shipped a record-breaking 10 million smartphones, sending its shares surging 12.1 percent in after-hours trading.

The results not only surpassed expectations for the third quarter, but its forecast for the current quarter easily topped what most analysts were anticipating.

MKM Partners LLC analyst Tero Kuittinen said the sales outlook is a strong signal that RIM is successfully cracking the consumer market.

“That’s a major positive surprise because people have been very skeptical about the February quarter,” he said. “People wrote off RIM too soon.”

Competition did hurt rival Palm Inc, which posted a bigger-than-expected quarterly loss as consumer demand for its smartphones waned.

Shares in the company, which has worried investors with hefty costs as it tries to turn around its business, slumped 4 percent after its results were announced on Thursday.

RIM is waging an aggressive push into the mainstream market in an effort to drive growth and diversify its customer base beyond business professionals who use the BlackBerry for secure wireless email service. At the same time, it faces growing competition from Apple’s iPhone and Motorola’s Droid.

Some 80 percent of new subscribers were non-business users, but RIM said its corporate base also grew, with especially strong gains in international markets. RIM said it will soon launch some “very, very powerful offerings” aimed at small business users and big corporate customers.

Investors had worried that growing sales of RIM’s retail-friendly, lower-profit smartphones, like the Curve, would squeeze average selling prices and revenue.

STARK CONTRAST

Investor fears were stoked by a disappointing outlook issued in September, which led analysts to cut forecasts and sent RIM’s stock into a 17 percent tailspin.

That was a sharp contrast with Thursday’s fourth-quarter forecast, which suggested the company’s market share is not eroding as feared.

But even with the 12.1 percent rally in RIM’s stock to $71.16 after the close, it still had not made up for the September swoon.

The Waterloo, Ontario-based company expects earnings per share of $1.23 to $1.31 and revenue of $4.2 billion to $4.4 billion. It sees gross margin of about 43.5 percent and expects to add 4.4 million to 4.7 million new subscribers.

It expects to ship 10.6 million to 11.2 million phones at an average selling price of $320.

Before RIM issued that forecast, analysts had expected earnings per share of $1.12 and revenue of $4.1 billion, according to Thomson Reuters I/B/E/S.

For its third quarter, ended November 28, RIM said profit rose to $628.4 million, or $1.10 a share, from $396.3 million, or 69 cents a share, a year earlier. Revenue rose 41 percent to $3.92 billion.

The results topped analyst expectations for a profit of $1.04 a share and revenue of $3.78 billion.

“There’s pretty much a clean sweep across the board of better-than-expected numbers,” said Paradigm Capital analyst Barry Richards.

“The fact that they beat by more than half a million units in shipments in Q3 would seem to imply that they either maintained market share or took market share, and that the consumer business was quite good. I mean, they beat by a lot.”

The company, which earlier on Thursday grappled with a email service outage for some North American BlackBerry customers, added about 4.4 million subscribers in the third quarter, for a total of about 36 million customers.

Some analysts say competition concerns are overblown and reflected an underestimate of the ongoing growth of the smartphone market.

Chief Executive Jim Balsillie said reports show that smartphones now represent 50 percent of total market for hand-held devices.

“I see that going all the way to 100 percent. The only question is the time to getting there,” he said on a conference call with analysts.

($1=$1.07 Canadian)

(Reporting by Susan Taylor, with additional reporting by Sinead Carew in New York, Gabriel Madway in San Francisco, and Cameron French in Toronto; Editing by Frank McGurty and Rob Wilson)

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December 18, 2009 - Posted by | Uncategorized |

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