RIM results lag estimates, shares drop

OTTAWA (Reuters) - Research in Motion said quarterly profit and sales rose, but the results lagged expectations and the stock tumbled on rekindled fears that the dominance of its BlackBerry smartphone is waning.

RIM, the object of increasingly higher expectations for its fiscal fourth quarter in recent days, said it shipped 10.5 million phones in quarter, well shy of a consensus estimate of about 11 million devices.

Profit and phone shipment forecasts had ratcheted up with RIM moving aggressively into the mainstream consumer market and expanding international sales to counter growing competition in its bread-and-butter sales to corporate executives.

The disappointing shipments may point to stronger demand for rival Apple's iPhone and that Motorola's Droid may have started to gain traction with consumers, Charter Equity Research analyst Ed Snyder said.

"They had this business to themselves for years. Now everybody's joined the party. The U.S. is probably tough for them now," said Snyder, referring to increased competition in the United States.

The Droid has been heavily promoted by Verizon Wireless, which is also expected soon to start selling the iPhone, which could further bruise RIM in the U.S. market.

RIM told analysts on a conference call that revenue in the quarter was hit by a customer's changed inventory policy and bigger sales of cheaper phones. But its chief executive repeatedly pointed to big plans for the year ahead.

"We guided a really strong Q1 based on just what is going on now," CEO Jim Balsillie said referring to product launch plans. "If you saw the roadmap you'd be blown away."

Balsillie's remarks may have eased investor concerns a bit as the U.S.-listed share price pulled off its lowest point in after-hours trading. By 6:30 p.m., it was down 2.7 percent after falling as much as 6.7 percent after the results were announced.

For the upcoming fiscal first quarter, traditionally a period of weak demand, RIM estimates that it will ship 11.2 million to 11.8 million phones and add between 4.9 million and 5.2 million subscribers.

It expects earnings per share of $1.31 to $1.38 and revenue of $4.25 billion to $4.45 billion.

Analysts expected earnings of $1.23 a share and revenue of $4.33 billion.

RIM sees gross margin at 44.5 percent and the average price of its phones at $305 to $310.

It expects a similar average price in the second quarter and an unspecified increase in the second half of the year as higher-price phones are introduced, RIM said.

Broadpoint Amtech analyst Mark McKechnie said the guidance is "pretty strong," which may suggest that sales may have been deferred from the fourth quarter to the first quarter of the new fiscal year.

The company said strong demand for its smartphones is leading to a tight supply chain for certain components in its devices, but that risk is reflected in the first-quarter forecast.

LATEST QUARTER NUMBERS

For its fourth quarter, RIM's profit rose to $710.1 million, or $1.27 a share, in the three months ended February 27, from $628.4 million, or $1.10, in the same period last year.

Revenue increased 18 percent to $4.08 billion.

The results lagged analyst expectations for a profit of $1.28 a share and revenue of $4.3 billion, according to Thomson Reuters I/B/E/S.

RIM's 45.7 percent gross margin exceeded expectations of 43.5 percent, easing concern that increasing sales of lower priced handsets would pull down profitability.

Bigger sales of high-margin Bold 9700 and Curve 8720 BlackBerry phones helped boost the gross margin, RIM said.

The average device price was about $311, below the estimated $320.

"Volume is lower than expected - that's probably got some investors nervous and it probably feeds nicely into some of the bears' comments," said Research Capital analyst Nick Agostino.

"My read here is that they are likely gaining share on an international level, and possibly losing share on a North American basis."

McKechnie said he was disappointed that fourth-quarter handset sales missed his expectation for 11.1 million units, but said RIM's addition of 4.9 million subscribers in the quarter was higher than his 4.6 million forecast.

(Reporting by Susan Taylor, with additional reporting by Sinead Carew in New York and John McCrank in Toronto; Editing by Frank McGurty)