Despite Losses, BlackBerry Maker Doesnt Fear Magneto

Rim's co-CEO explains a fourth-quarter loss and suggests that the upcoming Microsoft Pocket PC-based e-mail service pack may not be broad enough to challenge RIM's wireless middleware.

BlackBerry device maker RIM posted a loss in the fourth quarter as a result of settling its three-year patent dispute with NTP. Despite this drop, RIM Co-CEO Jim Balsillie remains confident, pointing out in an earnings conference call that BlackBerry has broad appeal due to its wide applications integration and globalized administration.

Research In Motion Ltd., of Waterloo, Ontario, reported a loss of $2.6 million, or 1 cent per share, for the fourth quarter, ended Feb. 26, compared to a profit of $41.5 million, or 23 cents per share, for the same period a year ago.

Excluding the $294.2-million litigation charge and related $151.6-million tax asset write-up, net income for the quarter was $140.1 million, or 71 cents a share.

RIM last month agreed to pay NTP Inc. $450 million, of which $137 million was already held in escrow, while the bulk of the remaining $313 million was expensed in the fourth quarter.

Revenue in the fourth quarter was $404.8 million, up 11 percent from $365.9 million in the previous quarter and up 92 percent from $210.6 million in the same year-ago period.

Higher-than-expected software sales offset lower-than-expected hardware sales in the quarter, Balsillie said.

While software revenue doubled to account for 14 percent of RIMs revenue for the quarter from 7 percent in the prior quarter, handheld revenue dropped to 66 percent of total revenue from 71 percent in the previous quarter. RIM attributed the hardware drop to inventory reductions by wireless carriers.

/zimages/3/28571.gifClick here to read an eWEEK Labs review of RIMs BlackBerry 7100t.

The number of BlackBerry subscribers in the quarter increased to about 2.5 million from 1.1 million at the end of RIMs last fiscal year, with RIM adding a higher-than-expected 470,000 new subscribers in the fourth quarter. RIM expects to reach three million subscribers in May of this quarter and to launch BlackBerry with 100 new carriers this year, said Balsillie.

Balsillie brushed aside a question about whether RIM sees a forthcoming competitive challenge in the corporate marketplace from Microsoft Corp., which reportedly plans to extend wireless push e-mail capabilities from its Exchange Server 2003 to Pocket PC-based devices.

/zimages/3/28571.gifWill Microsoft preview its handheld e-mail system, Magneto, at CTIA? Click here to read Guy Kewneys opinion.

"Its pretty hard to comment on something thats not launched," said Balsillie. "As I understand what Magneto is, its a service pack upgrade of MIS that works with Exchange 2003, and 2003s in … about 22 percent of their Exchange environments, and it will require an upgrade of the Windows Mobile, which is being embedded for … Windows Mobile devices for 2006. I dont know the specifics of the product, and I dont know the timing exactly, but I think its going to be a while."

Balsillie suggested that Magneto may not be of great interest to carriers, since carriers "tend to be interested in something thats pan-application, so if you have something thats Notes, Exchange, Groupwise, Prosumer, thats very, very interesting; [whereas] if youre hitting 20 to 25 percent of just Exchange, which is just 40 percent of the enterprise, it may or may not be a key solution, but [regardless] its maybe not a big part of an addressable market," Balsillie said.

/zimages/3/28571.gifRead details here about RIMs BlackBerry Java development tools.

"When you talk to CIOs, do you look for [wireless e-mail] to be … a single-app forward integration of an e-mail store or do you look for it to be a generic wireless middleware for a bunch of carriers, for a bunch of apps, and a bunch of devices in a bunch of geographies?" Balsillie said.

"I guess I could put it in a nutshell and say do you look to this to be a very specific forward-integration function or do you look for it to be fairly generalized and fairly buffered from other apps, and the feedback Im getting resoundingly from CIOs is they look for it to be pretty generalized. And that means CDMA, Mobitext, Iden, GSM, a bunch of carriers, a bunch of countries, Wi-Fi, and a whole bunch of apps—CRM, ERP, BI, IM," Balsillie said.

"The big pressure were getting is to be much more manageable…its much more about globalization of administration and role-based administration, really to be a corporate utility on a global basis," said Balsillie.

/zimages/3/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis on mobile and wireless computing.