By Wojtek Dabrowski
TORONTO (Reuters) - Research In Motion delivered a quarterly profit in line with forecasts and a rosier-than-expected outlook on Thursday that reflects strong holiday sales of its BlackBerry smartphones even as the global economy slows.
Investors were prepared for the fiscal third-quarter results, most of which RIM disclosed earlier this month. More important was the outlook for the current fourth quarter, which includes the crucial December holiday shopping season.
The fourth-quarter forecast has extra importance this year. RIM has a range of new BlackBerries on the market, while the mood for consumer and business spending is uncertain at best. The company has trimmed prices and benefited from heavy promotion from wireless carriers offering its products.
"In order to drive sales RIM has had to lower prices, but the sales growth is phenomenal in this market," Canaccord Adams analyst Peter Misek said of the results. "In the midst of a severe consumer recession, this is incredible."
Waterloo, Ontario-based RIM said it expects fourth-quarter revenue of $3.3 billion to $3.5 billion, and earnings per share of 83 to 91 cents.
The outlook topped analyst expectations for revenue of $2.97 billion and earnings per share of 83 cents, as compiled by Reuters Estimates.
The results, released after the market's regular close, initially pushed RIM's shares up 6 percent to $40.75 in after-hours trading, but they soon dropped back to near their Nasdaq close at $38.44.
RIM said it earned $396.3 million, or 69 cents a share, in the third quarter ended November 29. That was up from a profit of $370.5 million, or 65 cents, a year earlier.
Revenue rose to $2.78 billion from $1.67 billion.
Nick Agostino, an analyst at Research Capital, said RIM's outlook is "suggesting that the product portfolio is certainly starting to have the traction that was hoped for."
The company has recently launched a series of handsets -- a flip phone BlackBerry, the touchscreen Storm and the high-end Bold -- in hopes of capturing a broader swath of subscribers. It said it currently has about 21 million users.
However, the product rollout has also come precisely at a time when big companies and retail consumers alike are cutting costs to conserve cash. This made analysts worried that BlackBerry upgrades and sales could slump.
"Things could've been a lot worse, all things considered," Agostino said. "I think these numbers were, for the most part, a little bit of a relief for me."
RIM co-Chief Executive Jim Balsillie said that besides product-launch delays, the weak economy affected results in the third quarter.
However, the "strong" holiday sales and brisk new product sales "are laying the groundwork for a record number of shipments in the fourth quarter," he said during a conference call with analysts.
"Despite the current turmoil in the economy, we believe RIM is well positioned to take advantage of the industry shift to smartphones that is occurring and to grow its share in this market segment."
RIM's introduction of consumer-aimed devices such as the flip-phone BlackBerry and the touch-screen Storm are part of an aggressive push to diversify its client base beyond the executives, politicians and other professionals who have been its sales mainstay.
Meanwhile, Palm Inc., the California smartphone maker, had a wider-than-expected loss of 73 cents per adjusted share, against Wall Street expectations of 43 cents.
The company said its smartphone revenue was $171 million, down 39 percent from the year-ago period. It said that consumers had purchased only 599,000 units, down 13 percent compared to a year earlier.
(Additional reporting by David Lawsky in San Francisco; ; Editing by Peter Galloway)
