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) 2009 AllThingsD. All rights reserved.

Smartphones will capture 37 percent of the worldwide cell phone market by 2014, a leap from 16 percent in 2009, predicts a new report from Pyramid Research.

The report, released late last week, sees much of the growth coming from outside the U.S., notably in emerging markets. Across the globe, China is likely to outpace the U.S. as the largest smartphone market next year. Latin America will be the fastest-growing region over the next five years, with a compound annual growth rate (CAGR) of 48 percent for smartphone sales, forecasts Pyramid.

Top 10 most popular cell phones of 2009 (photos)

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"Pyramid expects China to capture the No. 1 position in 2010, driven by operators' aggressive promotion of smartphones using wider portfolios, more attractive pricing for services, and new initiatives," Omar Salvador, senior analyst at Pyramid Research, said in a statement. "Brazil, India, Turkey, and Nigeria will be the fastest growing markets over the next five years with CAGRs of 43 percent, 39 percent, 37 percent, and 34 percent, respectively. Latin America will be the fastest growing region at a compound annual growth rate of 48 percent, followed by Africa and the Middle East with a 39 percent CAGR."

With Pyramid forecasting sales of 1.8 billion smartphones over the next five years, the market looks like a huge opportunity for handset makers and wireless carriers. However, the report notes that growth in mobile subscriptions has been slowing, putting pressure on the industry to enhance data services and applications, which are seen as two primary drivers for smartphone purchases. Pyramid believes that handset makers and carriers will need to work together more closely to capitalize on the huge sales potential of smartphones, especially in emerging markets.

But a unified smartphone strategy has proven challenging for the industry, the report notes, due to differences in payment methods, subsidies, and the levels of competition.

In countries like the U.S. where there is no limit on subsidies and there is higher level of competition, operators such as AT&T use aggressive subsidies, unlimited data plans, and specific smartphones models--i.e., Apple's iPhone--with exclusive distribution to woo customers. By contrast, Russia prevents handset subsidies and focuses more on value-added services, lower prices, and free initial test periods for smartphone consumers.

"Understanding local conditions will be vital for operators, smartphone vendors, and OS developers, as operator strategies differ substantively across markets based on the method of payment (postpaid or prepaid), the prevalence of subsidies, the level of competition, as well as the market shares of operating systems," Salvador said.

A new DARPA contest is using balloons to test our social-networking skills.

After kicking off the Internet 40 years ago, the Defense Advanced Research Projects Agency is again tapping into the Net for a new challenge. The DARPA Network Challenge will award $40,000 to the first person who can identify the latitudes and longitudes of 10 red weather balloons positioned at different parts of the sky across the continental United States.

The 8-foot balloons are scheduled to lift off on Saturday at 7 a.m. PST and remain in their locations throughout the day, until sunset. The contest will be open until December 14, so contestants will have a little more than a week to gather up and submit their answers.

But the contest has a twist. Since no one person can identify all 10 balloons across the States in one day, challengers will need to rely on social networks to team up with others to pinpoint the locations of the balloons. DARPA's goal here is not to see if people can answer the question but to gauge how we use social networks to resolve a problem.

DARPA plans to launch 10 red weather balloons, somewhat larger than the one shown here, around the continental United States, and competitors are invited to try to identify the precise latitudes and longitudes of all 10 balloons to win a $40,000 prize.

(Credit: U.S. Air Force photo/Chief Master Sgt. Gary Emery)

"We are not interested in the balloons. We already know where those are," Norman Whitaker, DARPA's deputy director of transformational convergence technology, said in a statement. "It's the techniques people use to solve the challenge we're focused on. We have people who are going to be actively watching from the sidelines to see how this plays out."

Whitaker is hoping the contest will offer insight into how the Internet and social networks can help people build teams and collaborate with each other to solve real problems and challenges.

DARPA is leaving it up to the contestants to best figure out how to work with others to track the balloons. One example posed by Whitaker is that of using a Web site to offer a portion of the prize to anyone who shares info about the locations of the balloons. Another idea is to work with a charity and donate your winnings. People can also naturally ask for help through Web-based tools such as Facebook or Twitter, connecting via computers or smartphones.

Although the challenge may be tough, Whitaker believes that at least one person will be able to solve it, whether it takes five minutes or all day. But if no one responds with the locations of all 10 balloons by the December 14 deadline, the agency will reward the $40,000 to the first person who tracked down at least five of them.

DARPA isn't sure yet what it will do with the information it finds. But that's never stopped the agency before. "We're DARPA," Whitaker said. "We like to do things that are really out of the box."

The agency enjoys a history of out-of-the-box challenges. Past contests have set up races between unmanned, robotic vehicles, including DARPA's 2005 Grand Challenge and its 2007 Urban Grand Challenge.

Are you willing to take the DARPA challenge? How would you use the Internet and social networks to win the prize?

Despite increased publicity over the dangers of texting while driving, many teenagers (like many adults) have yet to get the message.

A third of cell phone users aged 16 and 17 admitted to texting while driving, according to focus groups and a report released Monday by Pew Research. For the report, "Teens and Distracted Driving," Pew surveyed 800 kids aged 12 to 17 about their cell phone use in the car. Teens 16 and 17 years old were asked about their role as drivers, while younger ones were questioned about their experiences as passengers.

Of all teens surveyed, 75 percent said they own a cell phone and 66 percent of those text. Half of teens 16 and 17 who own a cell phone said they've talked on the phone while driving.

Among passengers, 48 percent of teens 12 to 17 said they've been in a car while the driver was texting, and 40 percent have been in a car when the driver used a cell phone in a way that put everyone in danger.

Though some teen drivers said they only text at a red light or will hand the phone over to a passenger to text, others didn't seem to care about the risk.

Pew found one high school boy who said he thinks texting while driving is "fine," adding, "I wear sunglasses so the cops don't see [my eyes looking down]." A high-school girl admitted that she texts "all the time," and that "everybody texts while they drive...like when I'm driving by myself I'll call people or text them cause I get bored."

(Credit: Pew Research)

Many teens expressed concern about being in a car while the driver is talking or texting on a cell phone, noted Pew. But in several cases, the driver was the teen's parent.

"I am concerned because when my mom drives she talks on the phone a lot so she is still alert but she can get kind of dangerous," reported one young teen. Another boy said, "Yeah [my dad] drives like he's drunk. His phone is just like sitting right in front of his face, and he puts his knees on the bottom of the steering wheel and tries to text."

This latest Pew research confirms a deluge of other studies about the dangers of cell phone use while driving. One study by the VirginiaTech Transportation Institute found that truck drivers who texted were 23 times more at risk of a "crash or near crash event" than "nondistracted driving."

A Vlingo survey from May discovered that 26 percent of mobile phone users said they texted while driving. A test conducted by Car and Driver magazine showed dramatically slower reaction times by two drivers who tried to brake while texting.

Early Pew research from 2006 (before texting became widespread) found a quarter of adult cell phone owners felt that using their phone compromised their ability to drive.

Certain states, such as California, Connecticut, and Oregon have passed laws banning texting or talking on a mobile phone while driving. The U.S. Senate is currently looking at a bill that would give federal dollars to other states who pass similar laws.

In late September, Transportation Secretary Ray LaHood held a summit to discuss the issue of distracted driving. Around that time, President Obama signed an executive order banning federal workers from texting while driving.

Pew's Internet & American Life Project conducted its survey of 800 teens last summer. Pew and the University of Michigan also held nine focus groups with teens 12 to 18 between June and October to discuss the issue of driving and cell phones. Pew's results included the findings from both the survey and focus groups.

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.

BlackBerry Tour, which is available to both Verizon Wireless and Sprint customers, is under scrutiny for trackball issues that have led some Tour owners to return the smartphones.

The question is: how widespread is the problem?

TownHall Investment Research's David Eller said in a research note this week that he has consulted "experts" who have determined Research In Motion is having a "big trackball problem, especially with the Tour," which was launched in July.

BlackBerry Tour

(Credit: CBS Interactive)

Eller wrote that BlackBerry Tour owners are being forced "to clean the trackball frequently and preferably with compressed air." When they don't clean the trackball, the issues get worse, leading them to bring the device back to the store for repairs or returns.

It has gotten so bad, Eller contends, that Sprint's "return rates have been climbing toward 50 percent."

A 50 percent return rate on a mobile phone would be huge. But Sprint is telling a much different story.

"We experienced a small percentage of early production Blackberry Tour smartphones with trackball issues," a Sprint representative said in a phone interview Wednesday night. "As soon as the issue was identified, we worked closely with our partners at RIM to resolve the problem quickly. Any customer experiencing issues with the Tour should visit a Sprint service and repair center."

Sprint, which said it had never worked with TownHall Investment Research prior to the research note's release this week, said the number of BlackBerry Tour returns it experienced "weren't even close to 50 percent." The Sprint representative said it was "a very small percentage." He wouldn't release exact figures but did say the percentage was in line with other new devices that experience some hardware problems at launch.

But Eller didn't only mention Sprint. In the same note, he wrote that "Verizon is experiencing serious problems with the Tour." He claimed that "Verizon will soon be getting new smartphones from Motorola and Palm that compete with RIM. Verizon is angry about this recurring trackball problem and is telling its retailers to expect strong support for the new Motorola phone."

However, Verizon spokesman Jim Gerace said in a phone call Thursday that the "BlackBerry Tour has the lowest return rate of any smartphone Verizon Wireless is selling. In fact, its return rate is one of the lowest among all the products our company sells."

That said, Gerace did acknowledge that BlackBerry Tour devices did experience trackball issues when they were first released. He said that his company "caught it pretty early and we didn't sell many with the bad trackball."

Gerace offered a biting response yet when I asked him about the accuracy of Eller's contention that Verizon is angry at RIM and will be strongly supporting a new Motorola device.

"That is blatantly not true," Gerace told me. "Just look around at our advertising. Does it look like we're not pushing the BlackBerry Tour?"

RIM did not immediately respond to requests for comment.

The number of people grabbing their Internet access through WiMax is expected to jump to 50 million by 2014, says Juniper Research.

A report released Tuesday by the British research firm describes the growth in WiMax stemming from areas unreachable or unserved by broadband cable or DSL.

(Credit: Juniper Research)

WiMax is a wireless technology that delivers broadband speeds over the last mile, ideal for locations where cabling is not available or feasible. Faster than current wireless 3G technology, WiMax can also serve large metropolitan areas as it covers a wider area than conventional Wi-Fi.

Referenced in the report, the most advanced WiMax standard, WiMAX 802.16e, delivers greater throughput than other WiMax standards.

Though large-scale WiMax deployments have been delayed, many providers have so far been successful in countries ranging from Pakistan to the U.S., says Juniper.

The new 4G Clearwire wireless networks used by Sprint, Comcast, and other providers, runs over WiMax.

But WiMax faces an uphill climb against the competing wireless broadband standard Long Term Evolution, or LTE. A recent study by research firm In-Stat, predicted that WiMax may ultimately lose the battle against LTE, which is already backed by major telcos AT&T and Verizon.

Juniper Research, however, believes that the global deployment of WiMax will drive its growth. The larger number of WiMax subscribers will be in the Far East and China region, says the report, due to that area's early adoption of the technology.

WiMax gains in Western Europe and, to a lesser degree North America, will occur in areas underserved by DSL. Growth in Africa and the Middle East is likely to surpass that of Western Europe, says Juniper, gaining 15 percent of the overall WiMax subscriber base by 2014.

"WiMAX 16e will have opportunities not just in developing countries, but also areas of developed countries where the DSL coverage is weak or nonexistent," said Howard Wilcox, the author of the report. "The key for the industry ecosystem now is to overcome the challenges and ensure trials evolve into commercial services quickly."

More information about WiMax can be found here.