The Wall Street Journal
BlackBerry maker Research In Motion Ltd. posted a surge in quarterly profit and revenue, though it added fewer new subscribers than it had expected amid intensifying competition in the U.S.
RIM said it shipped 12.1 million devices to wireless carriers and stores in its fiscal second quarter, up 45% from a year ago. But the company added 4.5 million net new BlackBerry subscribers in the quarter, down from 4.9 million in the preceding quarter. It had expected to add between 4.9 million to 5.2 million accounts in the period.
Co-CEO Jim Balsillie said subscriber growth initially was hurt by competing products entering the market during the summer and by weakness in Middle East markets due to concerns local service could be interrupted due to disputes with governments over security issues.
Mr. Balsillie said RIM remains in discussions with India and the United Arab Emirates to resolve concerns about their inability to monitor encrypted communication over BlackBerrys and is optimistic about a positive resolution.
The Canadian company has long held sway over the corporate market for smartphones. But it is falling behind Apple Inc. and makers of devices based on Google Inc. software in the race to sell high-end phones to consumers. Apple launched its iPhone 4 on June 24, and Verizon Wireless rolled out updates to its Droid line this summer.
RIM launched the Torch, which has a touchsreen and slide-out keypad, with just over two weeks remaining in the quarter, which ended Aug. 28. Mr. Balsillie said the launch was the most successful in the company's history, but he didn't disclose how many units sold.
Analysts have warned that initial sales have been weak. RIM said it expects stronger sales and subscriber gains in the third quarter, when the Torch, which launched exclusively with AT&T Inc., will hit more markets.
Mr. Balsillie said subscriber additions were particularly soft early in the second quarter but strengthened following the release of the Torch and remained stronger in the current quarter.
RIM, however, said it will stop forecasting subscriber additions or disclosing its average selling prices after December—two closely watched gauges of its business.
RIM's failure to keep up with the iPhone and Android devices in the consumer market is starting to erode its hold on business customers, as employees press their companies to let them use their personal devices at work. Over the past year, Apple and Google have been upgrading their software to attract corporate clients.
Research firm IDC expects BlackBerry to lose business market share for the first time this year. IDC forecasts that BlackBerry world-wide will drop to 36.4% from 39.9% last year. Meanwhile, Apple's iPhone is expected to rise to 8.7% from 8%, Android is expected to increase to 1.1% from 0.4%, and Microsoft Corp.'s Windows will jump to 27.8% from 25.6%.
"RIM is under a significant threat, and we now expect the contribution to earnings of the corporate segment to shrink going foward," wrote Sanford Bernstein analyst Pierre Ferragu, which surveyed companies and found nearly three-quarters are preparing to support non-BlackBerry devices.
Staying competitive may require price cuts. In February, RIM released a free version of its enterprise server for small and medium sized businesses. The software only works with Microsoft email software and supports up to 2,000 users with a separate computer server and limited ability to monitor and control phone usage.
Alex Yanez, telecommunications engineer at retailer Patagonia Inc., said RIM has also been cutting its prices of the standard BlackBerry server and software. "The server license and the seat license has come down quite a bit," said Mr. Yanez. Prices "have come down very much."
A RIM spokeswoman wouldn't comment on price cuts.
RIM said it shipped 12.1 million devices to wireless carriers and stores in its fiscal second quarter, up 45% from a year ago. But the company added 4.5 million net new BlackBerry subscribers in the quarter, down from 4.9 million in the preceding quarter. It had expected to add between 4.9 million to 5.2 million accounts in the period.
Co-CEO Jim Balsillie said subscriber growth initially was hurt by competing products entering the market during the summer and by weakness in Middle East markets due to concerns local service could be interrupted due to disputes with governments over security issues.
Mr. Balsillie said RIM remains in discussions with India and the United Arab Emirates to resolve concerns about their inability to monitor encrypted communication over BlackBerrys and is optimistic about a positive resolution.
The Canadian company has long held sway over the corporate market for smartphones. But it is falling behind Apple Inc. and makers of devices based on Google Inc. software in the race to sell high-end phones to consumers. Apple launched its iPhone 4 on June 24, and Verizon Wireless rolled out updates to its Droid line this summer.
RIM launched the Torch, which has a touchsreen and slide-out keypad, with just over two weeks remaining in the quarter, which ended Aug. 28. Mr. Balsillie said the launch was the most successful in the company's history, but he didn't disclose how many units sold.
Analysts have warned that initial sales have been weak. RIM said it expects stronger sales and subscriber gains in the third quarter, when the Torch, which launched exclusively with AT&T Inc., will hit more markets.
Mr. Balsillie said subscriber additions were particularly soft early in the second quarter but strengthened following the release of the Torch and remained stronger in the current quarter.
RIM, however, said it will stop forecasting subscriber additions or disclosing its average selling prices after December—two closely watched gauges of its business.
RIM's failure to keep up with the iPhone and Android devices in the consumer market is starting to erode its hold on business customers, as employees press their companies to let them use their personal devices at work. Over the past year, Apple and Google have been upgrading their software to attract corporate clients.
Research firm IDC expects BlackBerry to lose business market share for the first time this year. IDC forecasts that BlackBerry world-wide will drop to 36.4% from 39.9% last year. Meanwhile, Apple's iPhone is expected to rise to 8.7% from 8%, Android is expected to increase to 1.1% from 0.4%, and Microsoft Corp.'s Windows will jump to 27.8% from 25.6%.
"RIM is under a significant threat, and we now expect the contribution to earnings of the corporate segment to shrink going foward," wrote Sanford Bernstein analyst Pierre Ferragu, which surveyed companies and found nearly three-quarters are preparing to support non-BlackBerry devices.
Staying competitive may require price cuts. In February, RIM released a free version of its enterprise server for small and medium sized businesses. The software only works with Microsoft email software and supports up to 2,000 users with a separate computer server and limited ability to monitor and control phone usage.
Alex Yanez, telecommunications engineer at retailer Patagonia Inc., said RIM has also been cutting its prices of the standard BlackBerry server and software. "The server license and the seat license has come down quite a bit," said Mr. Yanez. Prices "have come down very much."
A RIM spokeswoman wouldn't comment on price cuts.
