Earnings: RIM Beats Expectations, Revenue Up 84 Percent Year-On-Year
Research In Motion (RIM) has released its fourth quarter and full year earnings for the fiscal period ending 28th of February 2009. For the fiscal fourth quarter, RIM (NSDQ: RIMM) reported revenue of $3.46 billion, an increase of 24.5 percent from the previous quarter of $2.78 billion and an increase of 84 percent from the $1.88 billion in revenue for the same quarter a year ago. Net income for the quarter was $518.3 million, an increase of 30.1 percent compared to the $396.3 million in net income for the previous quarter, and an increase of 25.6 percent compared to the $412.5 million earned in the same period a year ago. Eighty-three percent of the revenue was from devices, 12 percent from service, 2 percent from software and 3 percent from other revenue. The net income equates to $0.90 per share, which beats analyst expectations of profit of 84 cents per share on $3.42 billion in revenue (Financial News USA).
Full Year: For the fiscal year ending February 28, 2009 RIM saw revenue of $11.07 billion, an increase of 84 percent compared to the $6.01 billion earned in the previous year. Net income for the year was $1.89 billion or $3.30 per share diluted, up 46.3 percent over fiscal 2008.
RIM shipped about 7.8 million devices in the past three months and 26 million devices in the past 12 months, and there are now 25 million BlackBerry subscriber accounts. RIM added 3.9 million net additions to subscriber accounts in the quarter, about 35 percent higher than it predicted in December.
Click through for the earnings call.
Earnings Release
From The Earnings Call:
RIM predicts between $3.3 billion and $3.5 billion in revenue for the first fiscal quarter, and 3.7 million to 3.9 million new subscribers. The ARPU for its subscribers is falling slightly as more non-enterprise customers sign up. It predicts a gross margin for the quarter of 43 to 44 percent.
The Land Grab: RIM is involved in what it calls a “land grab” of new customers, which is putting pressure on its margins which is in turn worrying investors — who are probably relieved that the margin seems to have bottomed out. In the call Jim Balsillie, Co-CEO at RIM, said that “the most difficult aspect of gross margin is turbulence in currency swings around the world”, which RIM didn’t forsee. RIM is trying to create more value propositions for “deeper penetration” in its corporate customers, and has launched file sharing and enhanced its e-mail managment to do so. In the consumer business it still sees the land grab as happening and believes it’s “still in early innings”.
Inventory:
Carriers are reducing inventory and RIM predicts this will continue into the first weeks of its next fiscal quarter (March), and this reduction is due to the wider economy rather than specific to BlackBerry. Balsillie also said the carriers would have to change course on this considering the increasing demand for high-end phones. “They are very well aware of how profitable blackberry is for the business…and how much they’re growing with us. So this goes in the category of penny-wise pound-foolish,” he said in the call. RIM expects carriers to start increasing their inventory soon, at least for the high-end handsets that RIM sells. Balsillie said there is a lot of segmenting in devices and services, and that this would likely increase.
App Stores:
RIM announced its BlackBerry App World yesterday, and was asked a question about the variety of app stores in the market and whether carrier app stores would be competition. Balsillie said that the app store is “not a big profit driver but … it’s kind of a precondition”, and that RIM was shocked by the level of adoption and the flow of users to BlackBerry App World since it was launched. He said that there is a lot for a carrier to do to run an app store (deal with developers, environment, agreements, merchandising and so on) and that it’s inefficient for carriers to do so. He advocated giving the carriers space within the manufacturers app store: “Let carriers have their own store within the store, let them have their own branding, let them have rev share”.
