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BlackBerry-maker hit as subscriber growth slows
Wed Dec 3, 2008 7:34am EST
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By Paul Sandle
LONDON (Reuters) - BlackBerry smartphone maker Research In Motion Ltd cut its third-quarter profit and revenue outlook well below Wall Street expectations, pointing to slower subscriber growth, weaker margins and sharp currency swings.
Shares in the company were indicated down as much as 14 percent ahead of Wednesday's market open.
In a surprise announcement on Tuesday night, RIM said it expected fiscal third-quarter revenue of US$2.75-$2.78 billion -- 9 percent below the midpoint of analysts' forecasts, which ranged from $2.77 to $3.10 billion.
Adjusted earnings are now expected to be 81 cents to 83 cents per share, compared with the 89 cents to 97 cents per share the company had initially forecast for its third quarter, which ended November 29.
Analysts, on average, had expected third-quarter earnings of 89 cents a share on revenue of $2.92 billion, according to Reuters Estimates.
"Product launch timing, general economic conditions and foreign exchange volatility have tempered our results in the third quarter," Co-Chief Executive Jim Balsillie said in a statement.
It was a sharp contrast to the bullish tone he had taken just two months ago when the company reported strong second-quarter results in late-September.
Research in Motion was widely considered one of the leading stocks of the last tech investment cycle along with Apple Inc, Google Inc and Amazon Inc, which collectively were dubbed the Four Horsemen of Tech.
SUBSCRIPTIONS WEAKER
RIM stock reached a record high of nearly $150 on Nasdaq in June, but has since plunged. It was indicated nearly 14 percent lower at $32.20 ahead of the market open, which would put it 78 percent below June's peak.
"Profits are being impacted by exchange rates but the fact that subscriber additions and shipments both look set to fall below expectations is tangible evidence that the market is slowing considerably in Q4," said analyst Geoff Blaber at CCS Insight.
"Whilst smartphones will be a growing segment in a shrinking market next year, this is further evidence that growth looks set to slow considerably compared with 2008."
The revised earnings forecast excludes the negative effect on RIM's tax rate from the depreciation of the Canadian dollar relative to the U.S. dollar, RIM said. Third-quarter tax rates will range from 40 to 42 percent, a sharp hike from 29 to 30 percent rate in the second quarter.
The expected number of net new BlackBerry subscriber accounts added in the quarter would be about 2.6 million, 10 percent below its previous forecast for 2.9 million, RIM said.
But despite the lower results, the company said it had "experienced particularly strong momentum in recent weeks," which had continued into its fourth quarter. Continued...
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