BlackBerry maker Research In Motion (RIMM) says Q4 subscriber growth is beating its expectations but margins and profits will disappoint. Strong subscriber growth means more marketing expenses and selling more new devices at lower margins, which means weaker profitability overall.
The big question for RIM: Will it ever be able to inch margins up again? Or will it increasingly have to operate at lower margins to fight increasing competition from Apple (AAPL), Palm (PALM), and Google (GOOG)?
Specifics from RIM’s announcement:
- “RIM now expects net subscriber account additions for Q4 to be over 20% higher than the 2.9 million net subscriber account additions forecasted by RIM on December 18, 2008.”
- RIM “expects revenue for the quarter to be at or near the mid-point of the previously guided range.” That midpoint is $3.4 billion — just a hair under the Street’s $3.41 billion consensus.
- “Gross margin and earnings per share for the quarter are expected to be at the low end of the previously guided ranges.”
- Why? “A variety of factors, including product mix, lowered channel inventory levels and an increased ratio of new subscriber sales to upgrade and replacement sales, are contributing to the degree of outperformance in subscriber growth relative to revenue and earnings performance within the quarter.”
RIM will announce results from its fourth quarter — which ends on Feb. 28 — on April 2.
The company also announced last night that it’s agreed to acquire security tech firm Certicom for about $105 million. Certicom rebuffed a deal about half that size late last year, and RIM got into a bidding war with VeriSign (VRSN).
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