Wireless

RIM's new BlackBerry Bold has the company confident about its upcoming quarter.

(Credit: RIM)

Updated 3:30 p.m. PST with details following the conference call.

Research In Motion's third-quarter results were a little disappointing, as expected, but a strong holiday season is giving it reason to be very optimistic.

The company had already revealed that it expected third-quarter revenue and profit to be lighter than originally expected, and the official numbers released Thursday were in line with those revised expectations at $2.8 billion in revenue and net income of $396.5 million. Adjusting for the tax complexities involved with RIM's Canadian base of operations and its heavy U.S. presence, earnings per share of 83 cents were a penny ahead of analyst estimates polled by ThomsonOne.

However, in a press release RIM said that "we have enjoyed our best ever start to the holiday buying season over the past few weeks," owing to the recent launches of the Storm and Bold. As such, it provided guidance well above what analysts were expected for the upcoming quarter.

RIM now expects revenue of $3.3 billion to $3.5 billion and earnings per share of 83 cents to 91 cents during the current quarter, far outdistancing analyst estimates of $3 billion in revenue and earnings per share of 83 cents.

Updated 3:30pm: Product delays that hurt RIM's third quarter results are giving it cause for celebration in the fourth quarter, said Jim Balsillie, co-CEO of RIM, on a conference call Thursday afternoon. The Storm is doing particularly well, he said, setting a single-day record for new BlackBerry subscribers during the day it went on sale.

The company said it is having trouble keeping up with demand for the Storm, reviews of which were lukewarm. Rumors have been circulating this week that RIM and Verizon, the exclusive U.S. carrier of the Storm, have been dealing with a high rate of returns for that device, but a RIM spokesman shot down those rumors Thursday with a statement saying "The Storm has the lowest return rate of any of our PDAs and at this point in its life cycle, it has the lowest return rate of any PDA we currently sell."

RIM's priority over the past year has been to diversify its customer base away from enterprise customers toward consumers, and it's making progress: 45 percent of RIM's BlackBerry customer base now comes from consumers, Balsille said. The timing on that shift is fortuitous, given how the state of the economy is likely to put a lid on business spending for a quarter or two.

Balsillie was not asked how his products were faring against the iPhone 3G, RIM's main competitor at this stage of the game. That might be because the two companies do not report earnings on the same schedule, making direct comparisons a little difficult until market share numbers are released from the usual suspects. Apple is expected to sell around 6.4 million iPhones worldwide during the October to December period, while RIM shipped 6.7 million BlackBerries worldwide from September to November and expects to sell between 7.5 million to 8 million units in the current three-month period.

One sore spot for RIM is that its gross margins are declining as sales of the new models accelerate, but at around 40 percent, they are still healthy. Balsillie promised to wring cost savings from the products as the volumes grow.

The Centro is keeping Palm afloat, but it needs more than pretty colors to get back on track.

(Credit: Palm)

With revenue falling to dire levels, Palm may need a Christmas miracle to stay afloat next year.

The latest dose of bad news? Revenue for Palm's second fiscal quarter, which ended last week, will be just $190 million to $195 million, the company announced Monday ahead of its December 18th conference call. Wall Street analysts had been expecting Palm to record $331 million in revenue, an astonishing 41 percent gap caused by "reduced demand for maturing smartphone and handheld products," Palm said in a press release.

Last week Palm revealed plans to cut workers and refocus its business as it copes with a poor economy and strong competition from the likes of Apple and Research in Motion. Palm's Treos were once very popular, but they have looked positively ancient against the iPhone and new BlackBerrys such as the Storm and Bold. If it wasn't for the Palm Centro--which doesn't really break any ground on the software front but costs an attractive $99--Palm might already be dead.

The company's fortunes will be determined by a race against time: if Palm can get products using its Nova operating system--which scheduled to arrive in the first half of 2009--out in the market before sales of Treos dwindle to zero, it has a chance to regain its perch atop the mobile computing world. Otherwise, Palm is stuck in a moment and it can't get out of it.

RIM's BlackBerry Bold, coming soon to the U.S., is more expensive to build than older models like the Curve.

(Credit: RIM)

For the second straight quarter, soaring earnings weren't enough to satisfy Research In Motion investors worried about the prospects of lower profits to come.

RIM reported its second-quarter results Thursday, posting an 88 percent jump in revenue and a 72 percent jump in net income compared to last year. The numbers, $2.58 billion in revenue and $495.5 million in net income, were roughly in line with the company's own expectations but slightly below those of financial analysts.

But RIM revealed that its gross margins will be lower than usual for the next several quarters as it introduces new products that are slightly more expensive to build than its current models. In addition, the U.S. launches of the BlackBerry Bold and the BlackBerry Pearl Flip will come a little bit later in the company's third quarter than it had expected earlier in the year, meaning they'll contribute a little less to this quarter than RIM had anticipated.

That news sent RIM's stock down around 20 percent in after-hours trading as investors digested the news. RIM's gross margins are pretty solid, at around 50 percent, but they are heading down into the mid-40s as the company starts building the more expensive handsets in large volumes.

Still, RIM co-CEO Jim Balsille wasn't worried about his company's prospects heading into the rest of the year, on a conference call following the release of RIM's numbers. Balsille compared the current market for smartphones as a bit of a "land grab"--the same term he used last quarter--and said RIM would regret missing out on the opportunity to take advantage of demand for smarter mobile phones if it wasn't willing to take a bit of a cost hit through more sophisticated hardware and increased marketing expenses.

During the upcoming quarter the BlackBerry will be the centerpiece of several so-called "hero" campaigns launched by partners, presumably carriers and software developers, Balsille said. "Everyone has a hero campaign where we are a featured or the featured device for the holiday season," he said.

RIM has been trying to expand its footprint beyond the enterprise to consumers, the target for devices like Apple's iPhone. Right now, consumers make up 42 percent of RIM's subscriber base, but more than half of all new subscribers in the second quarter were consumers, Balsille said.

BlackBerry sales were roughly in line with what Wall Street analysts had expected, at 6.1 million units shipped, but below some of the more optimistic estimates.