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Feb. 13, 2009

Researh in Motion raised its forecast for subscriber additions in the current quarter but warned its profit will come in near the bottom of its previous expectations.

The announcement follows Research in Motion's (RIM) acquisition of encryption company Certicom and reports that four RIM executives have agreed to pay $92 million in compensation for benefits they received from incorrectly priced stock options.

On Feb. 11, RIM raised its earlier forecast of net subscriber-account additions for the fourth quarter, ending Feb. 28, by 20 percent. On Dec. 18, it had forecast 2.9 million net additions for the quarter. RIM also said it expects revenue for the quarter to be at or near the midpoint of the company's previous guidance.

The December forecast called for fourth-quarter revenue between US$3.3 billion and $3.5 billion.

New product introductions contributed to record levels of net subscriber-account additions throughout December, as the BlackBerry maker also enjoyed a successful holiday sales surge, the company said.

The delayed and hotly anticipated BlackBerry Storm debuted to long lines and sellouts in late November. Following the holidays, net new subscriber additions have continued to exceed the company's sales expectations, though RIM expects the gains to become more normal beginning in March.

But the company's quarterly earnings per share and gross margin are likely to be at the low end of the range predicted in December, RIM said. That range was between $0.83 and $0.91 per share, with gross margin between 40 per cent and 41 per cent.

RIM cited changes in product mix, lower inventory in sales channels and a higher ratio of new subscriber sales to upgrades and replacements.

The subscriber growth news came as a rare ray of light in a mobile industry that looks gloomy and uncertain heading into this year.

Overall handset sales dropped ten percent in the fourth quarter, according to ABI Research. Nokia, the largest mobile-phone maker, said Wednesday it would close an R&D facility and lay off about 320 people from it as a result of lower sales.

In addition to making BlackBerry smartphones, RIM also provides encrypted push e-mail services through its NOC (network operations center). In January, the company announced it had sold its 50 millionth BlackBerry. But not all has been rosy lately for the Waterloo, Ontario, company.

On Feb. 5, several RIM executives settled with the Ontario Securities Commission on charges they had engaged in improper backdating of employee stock options.

Nokia sold 15 per cent fewer cell phones in 2008's fourth quarter compared with the same period in 2007.

However, major mobile operators have reported subscriber gains and rising revenue from mobile data services.

As part of the deal, CEO Jim Balsillie has agreed to step down from RIM's board for twelve months. RIM is still working on a settlement with the U.S. Securities and Exchange Commission, however.

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Source: Research in Motion Inc.