TORONTO/NEW YORK (Reuters) - Research In Motion said its quarterly earnings and gross margin would come in at the low end of expectations even as subscriber growth topped forecasts, a warning that sent shares of the BlackBerry maker down almost 12 percent on Wednesday.
Analysts said RIM was able to attract new subscribers with flashy smartphones such as the touch-screen Storm or high-end Bold, but its existing customers were not upgrading their devices as frequently with economic conditions weak.
"You probably see big financial institutions cutting costs ... and the consumer is just not getting a new handset," said James Cordwell, an analyst with Atlantic Equities in London. "It just shows they're not immune to the economic slowdown like anybody else."
RIM
The company said it now expects net subscriber account additions in the quarter that ended February 28, to be 20 percent higher than the 2.9 million additions it forecast on December 18.
But earnings per share and gross margin would come in at the low end of its forecast range, and revenue would be at or near the mid-point, said RIM, which competes with Apple Inc
In December, RIM had forecast quarterly revenue between $3.3 billion and $3.5 billion, with earnings per share of 83 cents to 91 cents. Both were above Wall Street's estimates at the time, and analysts ratcheted up their forecasts and the stock surged, gaining more than 40 percent year to date.
Wednesday's outlook signals RIM could miss the mean analyst forecast for earnings per share of 86 cents, according to Reuters Estimates. Analysts were, on average, expecting revenue of $3.4 billion.
Avian Securities analyst Matthew Thornton said RIM was probably selling "a lot more Storms which carry a lower gross margin and probably a lot less of their older legacy products, which carry much higher margins."
He added, "So you have a mix shift which weighs on margins and brings EPS to the low end of the range despite very good subscriber additions."
While subscriber performance after the holiday season had exceeded its expectations, RIM said it anticipates subscriber additions in the current quarter to return to normal levels.
The shares were down 11.8 percent at C$62.57 on the Toronto Stock Exchange shortly after the open. On Nasdaq, the shares were off 11.6 percent at $50.44.
($1=$1.25 Canadian)
(Reporting by Franklin Paul and Sinead Carew in New York and Scott Anderson in Toronto; Writing by Tiffany Wu; Editing by Frank McGurty)
