RIM Outlook Hints at Increased Competition

By Matt Hines  |  Posted 2006-04-07 Print this article Print

The device maker and mobile e-mail provider released first-quarter earnings estimates that fell short of Wall Street expectations. Some analysts said the news indicates that RIM's drawn-out patent litigation with NTP created opportunities for its rivals.

While Research In Motions fourth-quarter earnings met the firms previous estimates, experts said that the companys lowered first quarter sales outlook may evidence that its prolonged patent suit against NTP helped RIMs rivals boost their own fortunes.

On April 6, RIM reported fourth-quarter 2006 net income of $18.4 million, or 10 cents per share, compared to a loss of $2.57 million, or 1 cent per share, recorded by the firm in the same period last year.
The company said that its sales grew to $561.2 million during the fourth quarter, a 39 percent gain over the same time frame last year.

Cutting out legal costs from the NTP suit, RIM said it would have filed earnings of 65 cents per share for the fourth quarter, which met the firms earlier estimates for the period but fell short of the 67 cents per share earnings projection expected by analysts polled by Thomson Financial.

For its fiscal 2006, RIM reported revenue of $2.07 billion, a 53 percent increase over the $1.35 billion it recorded for 2005. The firm said that it shipped 1.1 million of its mobile devices during the fourth quarter, for a total of approximately 4.0 million units during 2006.

Despite hitting its earnings for the fourth quarter, RIMs latest projections for its first quarter 2007 fell well short of Wall Street analysts expectations. RIM said it expects to report sales between $580 million and $610 million for the first quarter, while analysts surveyed by Thomson Financial had been predicting revenues of $625 million for the period.

"With [the NTP suit] behind us, were excited to focus 100 percent on growing our business," RIM Chairman Jim Balsillie said in a call with investors. "While there is no doubt that our business lost some momentum during the last few months, everyone at RIM is encouraged and excited by the strength were beginning to see."

As a result of the patent NTP suit, which RIM eventually agreed to settle for roughly $613 million, Balsillie said that his company also failed to add as many new subscribers as it originally expected during the fourth quarter. While the executive had once predicted that RIM would add as many as 825,000 new users during the timeframe, the company ended up bringing onboard some 625,000 subscribers.

Click here to read more commentary about the RIM-NTP dispute. One the earnings call, Balsillie said that RIMs sales had increased since the NTP settlement was announced on March 3, reporting that RIM is currently adding roughly 50,000 new subscribers per week, compared to the average of 40,000 users per week it was attracting before the settlement.

The disappointing first quarter outlook, combined with the slowed growth of its subscriber base, caused some analysts to question whether or not uncertainty created by the NTP suit encouraged users to look into RIM alternatives.

Next Page: Effects on RIMs market position.


Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel