Wireless

Updated 3:01 p.m. PDT with information from the conference call.

On the day that Research In Motion suffered another nationwide mobile e-mail outage, it announced it beat analyst expectations in the fiscal third quarter of 2009 with strong sales of its BlackBerry smartphones.

BlackBerry Bold

(Credit: Research In Motion)

The company's earnings were up 59 percent compared to the same quarter a year ago. For the period that ended November 30, the company reported earnings of $628.4 million, or $1.10 per share, compared to $396.3 million, or 69 cents a share, for the fiscal third quarter last year.

Analysts had expected the company to report earnings of $1.04 per share on revenue around $3.78 billion.

The company said it shipped 10.1 million smartphones during the quarter. And it added about 4.4 million new subscribers. Analysts were expecting shipments of 9.5 million with 4.1 million new subscribers.

Some industry watchers have wondered if the new Motorola Droid that uses Google's Android operating system would hurt BlackBerry sales. The Droid is one of two Android devices being sold for Verizon Wireless, and it is the closest competitor offered on Verizon's network to the Apple iPhone, which is sold exclusively in the U.S. for AT&T's wireless network.

Strong sales on RIM's part indicate that the Droid and other Android devices introduced during RIM's fiscal third quarter did not present a major threat to the smartphone maker.

Still, Verizon is spending more money marketing the Droid than it has on any other phone that it has sold on its network. But RIM's co-CEO Jim Balsillie said that Verizon continues to be an important strategic partner. And he said that the market is growing so fast that there is enough business to go around.

"The proportion of smartphones to the total market is crossing 50 percent," he said. "And we see that going to 100 percent. It's just a question of when. The overall market is growing for smartphones and we have a very important place to play in that."

But he admitted that RIM can't afford to rest on its laurels. The company's devices are favorites among corporate customers.

"At the end of the day, you can't force love," he said. "You have to earn it every day. There is no free ride in this. But we have a good sense of what we are doing in this quarter and we feel we create value everyday."

RIM's strong earnings report comes on the same day the company experienced a nationwide e-mail outage for consumers using its BlackBerry devices. Earlier Thursday before the company reported results, RIM confirmed that some BlackBerry customers were unable to get Web-based e-mail. Users getting e-mail through corporate servers were not affected, though, and phone service and text messaging were also not affected by the outage.

The problem seemed to affect customers across all major carrier networks, including Verizon Wireless, T-Mobile USA, and Sprint Nextel. AT&T would not comment and referred questions to RIM, but several AT&T customers in California and in other parts of the country said they had problems as well.

RIM said it has resolved the e-mail service problems, though e-mail may be slow to come back to some customers. The company is still looking into what caused the outage.

"RIM has isolated and resolved the issue that was impacting some BlackBerry customers earlier this morning," a company spokeswoman said in an e-mail. "Some customers may still experience delays as e-mail queues are processed. RIM is continuing to investigate the cause of the issue and apologizes for any inconvenience."

Talk about unfortunate timing. Research In Motion (RIMM) has confirmed reports that Blackberry users across North America have been experiencing e-mail problems this morning. Evidently, the outage is affecting all BlackBerry users who rely on RIM's Internet-based e-mail service instead of corporate servers, regardless of carrier.

This, just hours before the company is to release its third-quarter results.

In a statement, RIM said customers "may be currently experiencing delays receiving email" but phone services and PIN-to-PIN messaging are working just fine. If offered no explanation for the service interruption, but said it engineers are doing all they can to resolve it.

Story Copyright (c) 2010 AllThingsD. All rights reserved.

Consumer demand for smartphones seems to be unstoppable.

In the third quarter, vendors shipped a record 43.3 million devices, up 4.2 percent from last year's third quarter and up 3.2 percent from this year's second quarter, says a report released Thursday by market researcher IDC.

(Credit: IDC)

Among smartphone vendors, Nokia still enjoys the greatest market share, according to IDC, with a 37.9 percent slice for the third quarter. ... Read More

Updated at 3:30 p.m. PDT with information from the conference call.

BlackBerry maker Research In Motion on Thursday said it sold fewer BlackBerry phones than analysts had expected and that the company's quarterly earnings were hurt by a legal settlement.

Even though RIM still saw strong sales of BlackBerrys, the news sent the company's stock price tumbling in after-market trading. Many are now wondering if RIM's disappointing sales are an indicator of a wider smartphone slowdown or if the news is an indication that the company is losing its edge in an increasingly competitive market.

RIM's co-CEO, Jim Balsillie, said the company is still in very good shape.

"This stuff (smartphones and mobile applications) is going much more mainstream," he said during the conference call. "And we are teed up to go much more mainstream. If this crosses over, as I think we are doing, we are in a good position and a very prosperous position."

He told investors and analysts that they shouldn't look too deeply into the sales numbers for hidden indications of a market slowdown. And despite a lackluster forecast for the next quarter, he said sales are set to explode in the long term.

"I appreciate looking for trends," he said. "But I don't think you should extrapolate too much over a little bump here or there."

Balsillie said earnings fell 4 percent in the second fiscal quarter due in large part to charges associated with a legal settlement.

For the quarter that ended August 29, the company said it earned $475.6 million, or 83 cents a share, compared to profits of $495.5 million, or 86 cents a share, for the same period a year ago.

What really hurt the company's profits was a charge of $112.8 million related to the settlement of a patent dispute with Visto. Excluding this charge, RIM said it would have earned $588.4 million, or $1.03 per share for the quarter.

Revenue rose to $3.53 billion from $2.58 billion a year earlier. Analysts had expected earnings of $1 a share on revenue of $3.62 billion, according to Thomson Reuters.

RIM also reported that it shipped slightly fewer devices than what analysts had expected. The company said it shipped about 8.3 million BlackBerry devices during the quarter, adding about 3.8 million new subscribers. Analysts had expected the company to add about 4 million new subscribers on shipments between 8.5 million and 8.6 million.

RIM said it expects revenue of between $3.6 billion and $3.85 billion for the third fiscal quarter that ends November 28. And it expects earnings per share to be between $1 and $1.08.

These forecasts are slightly lower than analysts' third-quarter revenue of about $3.9 billion. And they wanted to see RIM add 4.3 million new subscribers instead of the 4 million to 4.3 million new subscribers the company predicts.

Although Wall Street was disappointed in RIM's results, the fact remains that the company is still growing handset sales. In fact, sales are up about 40 percent compared to a year ago. But because RIM has been known to have even higher growth rate, some analysts are disappointed with these figures and are punishing the company's stock, which had been up earlier on Thursday in anticipation of the company's earnings news. After the market closed, shares were down 10 percent or more.

So the big question remains: what do RIM's results mean for the rest of the industry?

RIM leads the market in smartphone sales in the United States. But the company has many competitors nipping at its heels. Apple has reported strong growth of the iPhone, especially its new iPhone 3GS, introduced in June. And there are new Google Android phones from HTC and Motorola coming to market soon.

Even the Palm Pre did relatively well during the second quarter, despite the fact that it was being exclusively sold on Sprint Nextel, the third-largest wireless operator in the country, which happens to continue losing subscribers every quarter.

So it's quite likely that sales of smartphones will continue to climb, as Balsillie predicts. But he admitted during the call that the challenge the company faces is in executing its strategy. This means making sure that RIM's latest products get out the door on time.

"I really like our strategy," Balsillie said. "I know we are doing all the right things. But we have a lot of execution risk...And who knows what's going to happen."

For his part, Basillie says the company is well-positioned for the upcoming holiday season with new phones such as the BlackBerry Tour and the latest BlackBerry Curve, which were introduced this summer. Analysts also expect RIM to launch the next version of its touch-screen BlackBerry Storm on Verizon Wireless before the end of the year.

Research in Motion is about to launch a new social network for its BlackBerry App World store, according to a report from the blog TechCrunch.

The new site is called MyBlackBerry and it will allow device owners to create a social profile where they can share opinions and recommendations for their favorite applications and accessories, the story said. Users will also be able to share tips and tricks for using their devices.

TechCrunch claims that RIM will launch the new site on Tuesday. A source close to the company confirmed for CNET News that RIM is working on some kind of social networking site, but details of the site and when it will be launched weren't available. RIM declined to comment on the TechCrunch story.

According to TechCrunch, the new site will look more like a user group bulletin board than a true social networking site. The site will be personalized so that people can connect with others using the same device they have. For example, someone with a BlackBerry Storm will be able to chat or share information with others using the Storm.

The new social network site comes as RIM struggles to gain attention for its App World store. Unlike the iPhone App Store, which has more than 50,000 applications and has had millions of downloads, the BlackBerry App World store, which launched in March, only has about 2,000 applications.

The summer of the smartphone is heating up as Research In Motion is set to introduce on Sunday its latest BlackBerry device, called the Tour. But will it be enough to keep RIM king of the smartphone market?

BlackBerry Tour

(Credit: CNET )

The BlackBerry Tour is hitting store shelves at an important time for RIM, which has been reportedly taking a sales hit as carriers promote exclusive phones, such as the Palm Pre on Sprint Nextel's network and the Apple iPhone 3GS on AT&T's network, according to Michael Walkley of Piper Jaffray.

Walkley said in a research note published this week that BlackBerry sales declined in June at AT&T and Sprint as these carriers focused marketing dollars and sales attention on iPhone and Pre over older BlackBerry handsets. Sales of BlackBerry devices remained solid at T-Mobile USA, but they were slightly down at Verizon Wireless, after the carrier ended its "buy one, get one" promotion, Walkley also reported.

But now it looks like RIM has a new device to excite its base of business users and consumers, especially those looking for a smartphone they can take overseas.

Unlike its smartphone competitors, the BlackBerry Tour is not offered exclusively on a single carrier network. Instead it will be available on two carrier networks: Sprint Nextel and Verizon Wireless. Each carrier is set to launch the device on Sunday. Making its phone available on multiple carrier networks is not unusual for RIM, which sells its products on all four major carrier networks. But typically carriers don't make the devices available on the same day. In some ways, the non-exclusive arrangement could help RIM sell more devices because it greatly increases the potential sales base. But it might also hurt, if carriers focus more marketing attention and budget on promoting their exclusive phones.

It's yet to be seen how popular the new BlackBerry Tour will be. But at this point any new device from BlackBerry is likely better than none.

"Sales of the Tour are key in our opinion, as our checks indicated RIM may need strong July and August sales to meet its guidance," Walkley said in his research note.

The new phone, which sports Bluetooth, GPS, a 3.2-megapixel camera, a full QWERTY keypad, and a high-resolution screen offers everything that BlackBerry lovers have come to expect. And it also comes equipped with a Quad-band radio that allows the phone to be used internationally on both CDMA and GSM networks. The addition of the 800MHz and 1900MHz radio for CDMA is particularly important for users traveling to Latin America and parts of Asia where CDMA is available on these frequencies.

The device is likely to appeal mostly to business customers, particularly those who travel, and existing BlackBerry users. While Sprint Nextel also plans to market the phone to consumers, the carrier plans to target these customers first.

"Clearly there is already a strong base of BlackBerry customers, and many of them are business users," said Tim Donahue, vice president of business marketing for Sprint. "And we want to make sure they have access to the latest and greatest BlackBerry device out there."

Targeting BlackBerry base
Going after the business or enterprise customer is a smart move for Sprint. Business customers account for about half the subscribers on the Sprint network. But Sprint has also been pushing the Palm Pre as a business-friendly device. Donahue explained that there is room for multiple products to address the same market.

"There is no silver bullet when it comes to devices in this industry," he said. "It's more of a cadence and it's about building a portfolio."

For Verizon Wireless, the Tour is its major smartphone launch of the summer. The company hasn't made much noise about the Windows Mobile smartphones it has recently launched. And its last big smarpthone campaign was the exclusive deal for the BlackBerry Storm, RIM's only touch-screen phone.

The BlackBerry Curve and the BlackBerry 8830 World Edition phones have been big sellers for Verizon. But the BlackBerry Bold, which is only available on AT&T's network in the U.S., is considered by many BlackBerry aficionados to be RIM's most desirable BlackBerry. The Bold, which gets its name from its screen, has a high-resolution screen that has been described as eye-popping by CNET reviewer Bonnie Cha.

The BlackBerry Tour's design is a nice combination of the BlackBerry Curve 8900 (pictured here) and the BlackBerry Bold.

(Credit: CNET)

The BlackBerry Storm uses similar screen technology. But now with the BlackBerry Tour, Verizon is able to offer a device with a high resolution screen and a QWERTY keypad.

"If you take the keyboard and international reach of the BlackBerry 8830 and the screen quality of the Storm and combine them, you have the Tour," said Dan Mock, director of marketing for Verizon Wireless.

Walkley believes that the pent up demand for a BlackBerry Bold-like experience on Verizon's network will help make this a popular device for existing Verizon customers.

"We expect the Tour will sell very well to Verizon's installed BlackBerry subscriber base, as this is Verizon's first product that is competitive with the Bold at AT&T," he said in his note.

While the device will certainly be an important cornerstone of Verizon's smartphone line up, it's not an exclusive deal. So it's unlikely that the device will attract many new customers to Verizon. But Mock said that doesn't matter.

"It's never been our stance to go out and base our business on one iconic device," he said. "It's always been about the network for us. Still, I'd say we also have a strong portfolio of smartphones and mobile devices on our network."

For RIM the real question is whether the Tour can get enough momentum in the market to boost sales in July and August to reach its sales targets. The launch of so many other hot smartphones at one time presents a challenge for the company as it tries to push the Tour to the forefront of customers' minds.

And the pressure could continue to intensify as T-Mobile USA still launches its next Google Android phone, the MyTouch, in early August. T-Mobile has made the MyTouch its flagship smartphone, and the company is throwing a lot of money and marketing muscle behind the device. And even though carriers, such as AT&T, Sprint Nextel, and T-Mobile all claim that their sales reps are just as happy to sell a BlackBerry as they are any of these exclusive devices, it's hard to argue that these big marketing campaigns do not have an effect on sales of other devices, such as RIM's BlackBerrys.

AT&T may slash the price of its iPhone service plan by $10 when a new version of the touchscreen smartphone is launched this summer, according to a story on TheStreet.com.

The article cited analyst Michael Cote of Cote Collaborative saying that there is a "strong possibility" that AT&T will drop the entry-level price of its service plan to $59 from $69. Apple is expected to unveil the latest iPhone on June 8 during the company's World Wide Developers Conference in San Francisco.

(Credit: Apple)

AT&T declined to comment for this story, and Michael Cote did not respond to an e-mail request for an interview.

The price cut would likely help make the iPhone, which now retails for $200 with a two-year service plan with AT&T, more appealing to more mainstream customers. I've been saying for quite some time that the biggest hurdle to widescale adoption of the iPhone or any other smartphone in the mainstream market is the high price tag of the service contracts.

Consumers have shown that they are willing to pay anywhere between $100 and $200 for a sophisticated smartphone device. But the monthly service charge, which starts at $69 for the iPhone, is much harder to swallow.

It puts the real cost of the iPhone 3G over the life of the two-year contract at a whopping $1,856, which includes the price of the 8GB phone and 24 months of the most basic iPhone voice and data plan. It doesn't include the activation fee or taxes and other fees associated with the account. For subscribers who need more voice minutes or unlimited texting, the price tag is even higher.

Still, a $240 reduction in the overall cost of the phone over the life of the contract could entice some cost-conscious consumers.

Hewlett-Packard and Research In Motion announced on Monday a partnership for enterprise clients that incorporates the newly released BlackBerry Enterprise Server 5.0 software and a print service.

HP CloudPrint for BlackBerry Smartphones, a Web-based technology slated to be shown at this week's Wireless Enterprise Symposium in Orlando, Fla., lets users print e-mails, photos, documents, and Web pages from their BlackBerrys to the nearest printer, regardless of the printer manufacturer, HP said in a statement: "The service is printer-agnostic and driverless, and requires simple Internet access."

HP Operations Manager for BlackBerry Enterprise Server, also released Monday, is designed to enable companies to monitor and manage their BlackBerry enterprise environment. Managed BlackBerry Services, meanwhile, enables IT managers to outsource support of the BlackBerry environment to EDS Mobile Workplace Services, HP said.

"RIM and HP are working together to deliver solutions to customers that weave mobility into their daily operations--from innovative new services in the cloud to managed mobile services for the enterprise," Jim Balsillie, co-chief executive officer of Research In Motion, said in a statement. "Through our collaboration with HP, businesses will have access to an expanded set of applications and services for their BlackBerry smartphone deployments."