Research In Motion added more BlackBerry users in the fourth quarter than expected, but Wall Street focused instead another revelation from the company today: gross margins for the fourth quarter will come in near the low-end of the range. The company also said that despite the record growth in new subscribers, revenues would come in only in the mid-range of expectations. In afternoon trading, RIM’s stock fell more than 17 percent, or roughly $9.80, to trade at $47.21 a share.
The figures were released by RIM (NSDQ: RIMM) as an update to the fourth quarter ending Feb. 28. Full results will be out April 2. On the positive side, RIM said subscriber additions will be more than 20 percent higher than the 2.9 million forecasted by RIM in December. The company said it “had record levels of net subscriber account additions throughout the month of December and continued to see strong levels following the holiday buying season. The new BlackBerry products that were launched in the fiscal third quarter continue to be well received in the market and post-holiday subscriber performance in both North America and international markets has exceeded RIM’s earlier expectations.” While other handset makers, like Nokia (NYSE: NOK), have started to scale back production because of an economic slowdown, RIM sounded slightly more optimistic, though not bubbling with enthusiasm. In Q1, net subscriber additions will “reflect a more normalized average weekly run-rate, as the first quarter will not include the type of holiday surge experienced in Q4.”
There’s an easy explanation for why you can see record subscribers, and less than spectacular revenues and gross margins: The phones were cheaper to buy than they were to make. During the past couple of quarters, RIM has been cranking out some new and very popular devices, like the BlackBerry Bold and Storm. While they did their best to draw in new customers, RIM put a lot of money into their development and marketing, and then still had to sell them at a reasonable prices to stay competitive. As RIM has said before, these phones will become more profitable over time and with volume. Still, device sales are only one aspect of this company’s revenues. Unlike other handset manufacturers, RIM makes recurring revenue off subscribers, and it says it has new revenue streams coming. One of which is the BlackBerry application marketplace, where it will sell software to users directly, much like Apple’s iTunes store. Record subscribers numbers can’t hurt on that front. Release.
Photo Credit: edan
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