RIM Q4 Solid, No Enterprise Slowdown, Stock Up On Q1 Guidance (RIMM)

Research In Motion (RIMM) narrowly beat the Street on Q4 sales and EPS, but Q1 guidance mostly blew past analysts’ estimates. Shares are up 4%-5% after hours on strong sales/EPS guidance. Release, updated financial model.

Key points from the call: The soft economy hasn’t hurt RIM’s enterprise sales, co-CEO Jim Balsillie said.

Meanwhile, RIM continues to do well in the growing consumer smartphone market. Approximately 38% of RIM’s subscriber base is now “non-enterprise,” up from 34% in Q3 and 30% in Q2. This is mostly good news for RIM: More phone sales, more subscription revenue. Possible downside: Consumer gadgets like the BlackBerry Pearl are often cheaper and could generate lower monthly revenue.

One potential problem: RIM’s subscriber growth guidance. RIM says it expects to add 2.2 million net subscribers this quarter, roughly the same number it did last quarter. Why flat? RIM says it got an extra boost during Q4 from carrier promotions around the holidays. This could be problematic — AmTech analyst Rob Sanderson, for instance, was looking for RIM to forecast 2.4 million Q1 net sub additions — but so far the Street doesn’t seem to care.

Key Financial Stats:

Revenue: $1.88 billion, up 102% y/y and a hair above the Street’s $1.85 billion consensus.

EPS: 72 cents per share, beating Street’s 70 cents consensus, missing 76 cents whisper number.

Net income: $412.5 million, up 120% y/y.

Subscriber net additions: 2.18 million, at high end of 2.1 million to 2.2 million guidance.

Q1 guidance: Revenue: $2.23 billion to $2.3 billion, 12% to 15% ahead of $2.0 billion consensus. EPS: 82 cents to 86 cents, far ahead of 76 cents consensus. Net subscriber additions: 2.2 million, a bit low. (AmTech expecting 2.4 million.)

LIVE Conference Call Notes:

5:59 Lots of pressure on execution, etc. How about putting music on phones? Very seamless synchronisation to PC would be a very nice start; complately agree. Put that in category of “imminent things.”

5:56 Key thing to customer is discovery, platform that’s exciting. Social networking evolving from texting, a lot of ecommerce, stored value, etc. Slingbox, TiVo, etc. Long list of partners and buzzwords. Yawn. “Discovery.”

5:55 Music industry had a model, then came mp3, model went down tubes. Key thing for RIM is to make carrier a platform, not a pipe. Have to do that with respect to customer satisfaction, spectrum, capex, etc. Lots of interesting and uneasy alliances. Incredibly complex and essential job for carrier to do. Ours is to OEM some middleware to them, etc.

5:53 What are new/increasing problems that consumers/carriers have that you’re trying to solve for them? Core questions for telco: What’s my role in this world of voice-data convergence? Most strategic question is what is their relevance to customer? Some voice, p2p texting. Now carrier becomes a managed service platform. “Others” say “be a pipe.” (iPhone!)

5:52 JB is on a long rant about why BB is awesome. Wowza.

5:42 Big ramp up of devices that are being sold through for replacements and upgrades. Look at 8700 series, big bulk are just coming off 2-year service contracts, ripe for an upgrade. AT&T offered BB without plan; can’t give exact number, few hundred thousand range of subs without BB contract.

5:35 Further detail about “no enterprise impact.” I make the statements with a fair bit of in-market feedback but a lot of caution. I want to be right and obviously things are subject to change. I think it’s such a productivity tool. With MVS (“mobile voice service”) saves money, companies looking at it. People aren’t sort of shutting off their phone, but want to do things in efficient way. We haven’t seen it. If we do see it, we’ll let you know. Growth drivers more sector and execution specific than macroeconomic. Interest rates, credit issues have not seemed to have been principal drivers moving our industry. That could change, and if we see evidence that it does change, we’ll absolutely communicate it as quick as possible.

5:32 Deeper B2B, voice synchronisation, shifting to fixed-mobile. PBX synchronizing like email. Mainstream really has our attention.

5:31 How are carriers looking to push BB? Two elements of positioning: One is predictable, one particularly excited. Much bigger mainstream play going on, much bigger lead-up holiday season positioning, “all the mainstreamness.” Probably most pleasing stat beyond financial numbers: Facebook going over a million users. Demographic of FB known to be quite young. People think of BlackBerry as email. Think of it is “collaboration” or a “communications architecture that collaboration is part of.”

5:30 Guidance for Q1 isn’t based on launch of a new platform in the quarter. Curve for CDMA is included. Any new products beyond that aren’t included.

5:28 Increase in R&D? Infrastructure side after outage? Pretty broad based, heavy investment on a broad number of handhelds, incredibly powerful roadmap we’re excited about for the rest of the year. New BES architecture coming out. Growing infrastructures, distributed architectures, etc. All areas growing. Equally important.

5:26 Sense of conservatism of Q1 sub guidance? Listening to comments returning to more normalized levels following strong promotions. What factors in to some of thoughts? That’s a fair comment. We just keep getting into newer and newer ground in the business. Looking at varying run rates, buying cycles, new device strategies. Always heading into sort-of new situations, element of uncertainty. Still pretty early in this quarter, don’t have a lot of data. We have a pretty good handle in revenue, subscriber sort of plays on. Could be pleasantly surprised.

5:25 Q&A begins.

5:23 Q1 return to normalized growth trajectory after exceptional Q4. New Curve, Western Europe to drive growth. Strong growth in fiscal 2009 as launch multiple new devices. Expecting 51% gross margin, flat from Q4.

5:21 Going over Q1 guidance. Increase in volume will replenish channels after higher than expected Q4 sell through, greater replacement cycle. 8700 owners ready to upgrade to new handsets after 2-year contract is up. In Q4 many record breaking weeks of net additions after holiday and post holiday promotions. Strong net adds in Q1 so far, but not record levels we had in Q4.

5:17 Going through Q4 resuts from release.

5:16 Q1 expected to be strong, CDMA Curve. Forecast not dependent on introduction of new hardware platforms.

5:15 Slingbox compatible with Pearl. More than 1 million downloads of BlackBerry Facebook client.

5:13 Introducing pre-paid solution with Alcatel-Lucent (ALU). Will further broaden customer interest in BB, especially in emerging markets.

5:11 BB 8700 available in China, will be rolling out to regional operators in coming months. Good relationship with China Mobile.

5:10 Working with Orange to target SoHo/corporate customers with wifi enabled BBs.

5:07 Pearl family strongest net new adds. CDMA Curve available later this quarter on VZ, Sprint. Expecting good takeup. AT&T showed unprecedented sales growth. Curve played key role in AT&T regional customer holiday promotion. Aggressive campaign with $99 Curve. Red Curve a big part of Valentines day promo.

5:05 Some strong European markets but most of outperformance in North America/U.S. Total BB sub base over 14 million. Particularly strong in N. Am. Promotions mitigated seasonal slowdown, especially CDMA Pearl. No evidence of slowdown in enterprise business outside of normal seasonal trends.

5:04 Jim B. joins the call. Talking up 2007 results. Approx 38% of BlackBerry base non-enterprise, and over half of net new subs came from non enterprise customers.

5:02 Safe harbor statement disclaimer.

5:01 p.m. ET: Call begins.

See Also:
RIM’s iPhone Killer: Just Like iPhone, But Crappier
Research In Motion (RIMM) Preview: Huge Stock Upside
Smartphone Sales To Triple, Good News For Apple, RIM, Carriers

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