RIM Announces Third-Quarter Earnings Amid Court Battle

The BlackBerry maker sees a 33 percent jump in profits; the company expects better software revenue in the next few quarters, officials say.

Research in Motion on Wednesday reported a 33 percent jump in profits for the fiscal third quarter of 2006, in the midst of an ongoing court battle that threatens to shut down the companys popular BlackBerry e-mail devices and services.

Net income for the quarter was about $120.15 million, up from $90.4 million in the same quarter a year ago.

Revenue was $560.6 million, up 53 percent from $365.9 million in the third quarter of fiscal 2005.

The Waterloo, Canada, company added about 645,000 new subscriber accounts during the quarter, to make a total of 4.3 million subscribers worldwide, officials said.

The bulk of the revenue, 70 percent, was composed of client devices, with 19 percent for service, 7 percent for software licenses, and 4 percent for other revenue.

Company officials said they expect better software revenue in the next couple of quarters with the introduction of BlackBerry Enterprise Server 4.1 early next calendar year.

BES 4.1 originally was due by the end of calendar 2005; company officials said the delay was due to comprehensive testing of the product.

BES 4.1 includes Sarbanes-Oxley compliance, role-based administration and new SMS (short message service) features, officials said.

"Our business remains strong, despite the late launch of certain products and the ongoing litigation, which we are managing," said Jim Balsillie, chairman and co-CEO of RIM, during an earnings call.

NTP Inc., a patent-holding company in Arlington, Va., sued RIM for patent infringement in 2001.

U.S. District Judge James Spencer ruled in favor of NTP in 2003, instructing that RIM halt its sales of BlackBerry devices and services in the United States until NTPs patents run out in 2012.

He stayed the ruling, though, pending appeal. Since then, the case has gone through several appeals, and RIM is trying to take the case to the Supreme Court.

RIM and NTP came to a $450 million settlement in March, but the settlement fell through when the two companies couldnt agree to its terms.

In the meantime, the U.S. Patent and Trademark Office has been evaluating the validity of NTPs patents.

/zimages/5/28571.gifClick here to read more about the Patent and Trademark Offices rejection of two patents at the center of the battle that threatens to shutter BlackBerry service.

The office initially rejected NTPs claims in March, and it has been re-evaluating them for months.

In the past week, the PTO has indicated that it plans to issue a final ruling on the patents eventually, but analysts say this could take up to a year, especially if NTP appeals the ruling.

RIM has been trying to persuade the courts to stay any final ruling until the USPTO finishes its evaluation, pointing out that the office has a team dedicated to re-evaluating these patents.

Spencer has said that the court does not intend to wait for the PTOs decision, but he has yet to issue an injunction.

RIM maintains that the company has tested and readied a legal technical software workaround that would let the company continue to offer its mobile e-mail service even if the judge goes through with an injunction before the Patent Office makes its ruling.

On Wednesday, Balsillie said the company would reveal details of the workaround "very soon," but failed to elaborate beyond saying that it could ship latent in future products, and that it was "different at the absolute fundamental aspect," meaning it would not violate any of NTPs patents.

/zimages/5/28571.gifRead more here about the RIM-NTP patent dispute from columnist David Coursey.

In the meantime, Balsillie has been lobbying hard against NTP by lobbying for patent reform. He published an opinion piece in the Wall Street Journal earlier this week.

"At the end of the day, its not like we havent tried to be pragmatic and wont continue to be pragmatic," he said during the earnings call. "We will…work through the FUD. You just gotta do it."

For the future, the company reiterated a previous revenue guidance of $590 million to $620 million for the fourth quarter of fiscal 2006, which ends March 4.

But subscriber additions for the next quarter are expected to be lower than previously forecast, in the range of 700,000 to 750,000.

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