Research In Motion Ltd. will continue its global expansion by appealing to first-time BlackBerry smartphone buyers, but still has to compete in North America, a market its co-CEO says is "hotly contested."
Analysts have questioned whether RIM can hang on to its top position in North America, where the BlackBerry maker competes against Apple's touchscreen iPhone and smartphones running Google's Android operating system.
"North America is hotly contested, but we're in a great spot," co-CEO Jim Balsillie told analysts on Wednesday after RIM reported a sharp increase in quarterly profit but fell short of investor expectations.
The maker of the Blackberry smartphone, which keeps its books in U.S. dollars, said it earned US$710.1 million or $1.27 per share for the quarter ended Feb. 27 compared with a profit of $518.3 million or 90 cents per diluted share a year ago.
Revenue in what was the company's fourth quarter totalled $4.08 billion, up from $3.46 billion.
The average analyst estimate according to Thomson Reuters had been for earnings of $1.28 per share and revenue of $4.31 billion.
Balsillie said lower than expected smartphone shipments in the quarter were due to a change in customer inventory policy. He said the inventory problem, along with lower average selling prices for the entry-level BlackBerry Curve caused revenue to be slightly lower than expected.
Balsillie said strong international growth was driven by the entry level BlackBerry Curve series and the updated BlackBerry Bold.
"The globalization of RIM's business was a huge driver of growth in the fourth quarter and we expect this trend to continue," he said.
Balsillie said the success in international markets is being driven by first-time smartphone buyers who can buy pre-paid phones that can be adapted to local markets and text-centric young people who like the device's keyboard.
RIM has strong growth in Latin America, Asia and the Middle East, Balsillie noted.
In the fourth quarter, about 48 per cent of revenue came from outside North America and about 38 per cent of the subscriber base was from international markets, he said.
He added that RIM has a number of software and hardware products that will be unveiled in the coming year, when asked about growth in North America and how long RIM could keep growth going without introducing more touchscreen smartphones.
RIM introduced its touchscreen Storm to mixed reviews in 2008, followed by the Storm 2 last year.
The Waterloo, Ont.-based company is expected to launch a new web browser later this year to help make navigating the Internet easy, something analysts say RIM has lagged the iPhone and Android phones.
Analyst Nick Agostino said the results suggest strong demand internationally for the entry level BlackBerry Curve devices, but he still questioned growth in North America.
"The lower than expected average selling price (per device) for the quarter suggest strong demand internationally for the company's Curve-series devices, but draw questions around North American demand, and competition," said Agostino of Mackie Research Capital in Toronto.
Shares in RIM, which reported its results after the close of markets, closed down C$1.01 at $75.25 on the Toronto Stock Exchange.
RIM shares were down US$4.10 to $69.87 in after-hours trading in the U.S.
The company shipped 10.5 million devices in what was its fourth quarter and added approximately 4.9 million net new BlackBerry subscriber accounts to bring the subscriber account base to over 41 million.
In its outlook, RIM said it expects revenue for the quarter ended May 29 to be the range of $4.25 billion to $4.45 billion.
Earnings per share for the first quarter of RIM's financial year are expected to be in the range of $1.31 to $1.38 per diluted share.
BlackBerry shipments in the first fiscal quarter of 2011 are expected to bet between 11.2 and 11.8 million units. RIM is expecting between 4.9 million and 5.2 million net new BlackbBerry subscribers, Balsillie said.
RIM said it earned $2.46 billion or $4.31 per diluted share on $14.95 billion in revenue for its 2010 financial year. That compared with a profit of $1.89 billion or $3.30 per diluted share on $11.07 billion in revenue the previous year.
