Monday, December 21, 2009

RIM Rises After Profit, Sales Forecasts Top Estimates

Research In Motion Ltd. jumped the most in more than eight months in Nasdaq trading after the BlackBerry maker forecast sales and profit that topped analysts’ projections, buoyed by demand for its Curve phone.

Sales in the current quarter will be $4.2 billion to $4.4 billion, and earnings per share will be at least $1.23, RIM said yesterday. Analysts had estimated revenue of $4.12 billion and profit excluding some items of $1.12 a share, according to a Bloomberg survey.

RIM’s push to draw a wider audience, by selling phones through Wal-Mart Stores Inc. and Inc., helped make the Curve the top-selling smart phone in the U.S. last quarter, according to NPD Group Inc. Waterloo, Ontario-based RIM is also developing new Bold and Storm models to fend off competition from Apple Inc.’s iPhone and Motorola Inc.’s Droid.

“We needed to see that guidance to get the reaction to the stock we’re getting,” said Nick Agostino, an analyst at Research Capital Corp. in Toronto. He recommends investors buy the stock and doesn’t own any shares. “They sent a message on many fronts.”

RIM climbed $6.54, or 10 percent, to $70 at 4 p.m. New York time on the Nasdaq Stock Market, the biggest increase since April 3. The stock has climbed 72 percent this year.

Gross margin, the percentage of sales left after production costs, will be about 43.5 percent this quarter, RIM said. That compared with an average estimate of 42.6 percent from 10 analysts surveyed by Bloomberg.

‘Curve Effect’

Co-Chief Executive Officer Jim Balsillie said the third quarter that ended Nov. 28 was the company’s strongest for growth outside North America. About 35 percent of subscribers are from outside the region, he said on a conference call.

“It’s a case of the Curve effect driving the international growth and the holiday shopping season, the consumer driving the North American market,” Agostino said.

Balsillie also announced an agreement with China Telecom Corp. to offer the BlackBerry in China, the world’s biggest mobile-phone market. RIM said last week it will offer a BlackBerry customized for that country with China Mobile Ltd.

“China is an important and strategic market for RIM, and these partnerships will facilitate the broadening of our platform,” Balsillie said. “RIM is also exploring opportunities to manufacture and conduct R&D activities in the regions.”

Seeking Wider Audience

RIM is pursuing a wider audience than its traditional corporate user base as competition escalates with rivals. RIM said it added 4.4 million subscribers last quarter.

“RIM has delivered an impressive international expansion story,” said Tero Kuittinen, an analyst at MKM Partners LP in Greenwich, Connecticut. He has a “buy” rating on the stock. “Consumers in Europe and Asia find the new low-cost BlackBerrys highly appealing.”

Sales in the fiscal third quarter rose 41 percent to $3.92 billion, RIM said. Net income in the period climbed 59 percent to $628.4 million, or $1.10 a share, from $396.3 million, or 69 cents, a year earlier.

Gross margin last quarter was 42.7 percent, RIM said.

Brian Bidulka, RIM’s chief accounting officer, will become chief financial officer, Balsillie said on the call.

To contact the reporter on this story: Hugo Miller in Toronto at

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