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June 25, 2010

Late yesterday, Research In Motion (RIM) reported first quarter earnings that beat Wall Street estimates but missed analysts’ targets on overall revenue. RIM also announced a share repurchase plan for its stockholders. The company also projected second quarter revenue between $4.4 billion and $4.6 billion, in-line with analysts' estimates of $4.5 billion for the quarter. Second quarter earnings are expected to be between $1.33 to $1.40 per share.

Gross margin for Q2 is expected to be approximately 44 percent and net subscriber account additions are expected to be between 4.9 to about 5.2 million.

RIM also added 4.9 million net new BlackBerry subscriber accounts during the first quarter, bringing its total BlackBerry subscriber account base to about 46 million.

Almost 80 percent of the company’s revenue comes from device sales of its popular BlackBerry smartphone.

For the quarter, the company reported revenue of $4.24 billion, up 24 percent from the year-ago quarter. Net income came in at almost $769 million, or $1.39 per share, up from the $1.10 per share reported in the year ago quarter.

Wireless industry analysts had been expecting earnings of $1.34 a share on revenue of $4.36 billion.

In a statement, the company's CEO Jim Balsillie said "RIM achieved significant earnings growth and shipped a record 11.2 million devices during the first quarter, including its 100 millionth BlackBerry smartphone. We continue to be focused on growing our business globally and we believe that the range of exciting new BlackBerry products being released in the coming months will create significant opportunities to accelerate RIM’s growth in the second half of 2010."

Ironically, the company reported its earnings on the same day that consumers spent the night in line at Apple stores to get their hands on the new Apple iPhone 4.

Like Google, Apple has captured widespread interest and adoption of their new smartphones. More importantly, both companies have stepped up their offerings for business customers, the one segment where the Blackberry still dominates the market for now.

Overall, the competitive heat in North America could force RIM to focus on the growth of the business globally and that seems to be where the company is headed. Right out of the gate on a conference call with analysts, Balsillie said the business outside of North America was “particularly strong.”

He also said that the forecast for the second quarter was especially challenging because of the timing of the release of new devices and the new BlackBerry OS 6.0. He said that the introductions could bridge the close of the second quarter and opening of the third quarter and it’s unclear what sort of impact that might have on second quarter numbers.

Balsillie also suggested that the new tiered data pricing plan by AT&T could be a positive for BlackBerry sales simply because the caps on data usage could prompt consumers to embrace devices that are more efficient with data usage than others.

He added that BlackBerry customers could do just fine with the lower-tiered plan while owners of devices that run on other platforms could find themselves needing the higher-tier plan.

RIM also said it plans to repurchase up to 31 million shares over the next twelve months. It said it can repurchase about 10 million of the 31 million shares over the Nasdaq but that any additional purchases would be subject to regulatory approval.

In the past 12 months, the company has repurchased about 18.2 million shares.

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Source: Research In Motion.