RIM posts lower 2nd-quarter profit due to patent settlement; revenue jumps 37 percent

RIM posts lower fiscal 2Q profit, higher sales

TORONTO — BlackBerry maker Research In Motion Ltd. reported a drop in fiscal second-quarter profit Thursday because of charges for a patent settlement and said revenue for the current quarter will fall below Wall Street’s expectations.

Shares plunged more than 11 percent in extended trading Thursday.

Waterloo, Ontario-based RIM earned $475.6 million, or 83 cents per share, for the June-August period, down 4 percent from $495.5 million, or 86 cents per share, in the same period a year earlier.

Adjusted earnings were $1.03 per share and excluded a charge for a patent settlement payment to mobile e-mail provider Visto Corp., which claimed RIM was using its technology without a license.

Revenue rose 37 percent to $3.53 billion from $2.58 billion.

Analysts, on average, had expected a profit of $1 per share, excluding items, on sales of $3.63 billion, according to a poll by Thomson Reuters.

RIM said revenue for the current quarter is expected to be in the range of $3.6 billion to $3.85 billion — short of the $3.95 billion analysts were expecting.

RIM Co-CEO Jim Balsillie said on a conference call with analysts that RIM expects to ship between 9.2 million and 9.9 million new phones in the current quarter as the Canadian company introduces new models.

After enjoying success in the corporate market for years, RIM has been targeting the consumer market, where the BlackBerry faces intense competition with other smart phones like Apple Inc.’s iPhone and Palm Inc.’s Pre. Balsillie said more than 80 percent of new subscribers are consumers.

“There is no question this stuff is going mainstream,” Balsillie said.

RIM has said its market share of the U.S. smart phone market had grown to 55 percent by mid-June, from 40 percent about six months earlier.

Nick Agostino, an analyst with Research Capital, said the guidance and results raise questions about whether other smart phones have been cutting into RIM’s business but said the results are not that disappointing.

“It wasn’t a blow out quarter,” Agostino said.

RIM shares dropped $9.44, or 11.4 percent, to $73.62 in after-hours trading. Before the release of results, shares closed down $2.71, or 3.2 percent, at $83.06 in regular trading. The stock climbed more than 20 percent in the weeks leading up to the earnings.

“Clearly the third-quarter revenue was lighter than rising expectations so as a result the stock is off,” Genuity Capital Markets analyst Deepak Chopra said.

Chopra said consumers aren’t replacing phones as often, so carriers aren’t rebuilding inventory. Balsillie said Thursday that its carrier partners were expected to maintain low inventory for the time being.

But Chopra noted people are still buying the BlackBerry. RIM said subscriber account additions in the third quarter are expected to be in the range of 4 million to 4.3 million — better than Chopra and others anticipated.

“It looks like they are still winning their share of new smart phone users,” Chopra said.