BlackBerry maker Research In Motion’s (RIMM) Q3 was bad — but we knew that earlier this month. The good news: RIM’s Q4 outlook is better than expected, and the company says new smartphones like the Bold and Storm are selling faster than expected.
Co-CEO Jim Balsillie said on RIM’s earnings call that the company is “rocking it out” in December, and that its new gadgets have led to record BlackBerry service adoption. Shares are up 1% after hours to $38.83.
RIM expects Q4 sales — the period ending Feb. 28, 2009 — between $3.30 billion and $3.50 billion, ahead of the Street’s expected $2.99 billion. Similarly, it expects EPS between $0.83-$0.91 per share, beating the Street’s $0.83 consensus. RIM expects to sign up 2.9 million new subscribers in Q4, up 12% from last quarter.
“We are pleased to report record revenue results for the third quarter and we have entered the fourth quarter with strong momentum despite the challenging general economic conditions. In fact we have enjoyed our best ever start to the holiday buying season over the past few weeks,” said Jim Balsillie, Co-CEO at RIM, in a statement. “RIM launched an unprecedented number of BlackBerry smartphones in the third quarter and these new products are being adopted at an even faster pace than we expected. Our industry leading product portfolio is positioned well to capitalise on the increasing market opportunity in the fourth quarter of fiscal 2009 and beyond.”
LIVE Conference call notes:
5:01 Call begins. Standard disclaimers on the way.
5:03 Shares down $0.4% now after gains earlier.
5:04 Co-CEO Jim B. joins. Q3 results in line with prelim results but lower than originally estimated, primarily due to delays, mix of products, and forex. RIM shipped 6.7 million units in Q3, with new products a higher than anticipated mix of new products. As of result of strong demand for feature rich products, particularly Storm, think will sell more products than expected. But that’s causing gross margin to decline faster than expected.
5:06 Low 40s for GM. Q3 “pivotal.” Total BB sub base up 14%. Gross of net adds tempered by number of factors: Impact of customers delaying purchases, launch timing later, so longer overhang effect. High proportion of Bold to existing subs, so higher replacement rate. About 50/50 elsewhere. Also weakness in economy affecting net adds in Oct.
5:08 Strength continuing in Dec. Black Friday y/y net adds higher than last year, many carriers highest BlackBerry net adds ever in a single day. BB Storm launch has been exceptional, demand stronger than anticipated. VZ shares sold out first day, haven’t been able to meet demand in North America. Storm day was highest net sub adds day in history.
5:08 60% of net adds non-enterprise, now 45% of sub base.
5:09 Storm overwhelmingly attracting new subscribers. Verizon’s best-selling device. Anticipate that supply constraint will be fixed soon. Excellent early results elsewhere too.
5:10 Bold launched with AT&T. Once available, AT&T supported with multi-million marketing and ad campaign. Followed by 12-city enterprise, SMB roadshow.
5:10 Pearl Flip particularly successful in Canada.
5:11 Sprint Nextel started selling new Nextel Curve.
5:12 Bold doing well in Germany and U.K.
5:16 New BlackBerry dev tools.
5:20 Lots of Facebook app downloads. Grrrreat.
5:21 In great position for sectoral shift to smartphones.
5:21 Now going over numbers from release.
5:28 Forecasting lots of shipments of Storm, Bold. Software revs expected to increase slightly.
5:28 December has been a very strong month. Many carriers hitting highest numbers ever. Seasonal slowdown in late Dec., new year, reflecting typical buying factor of consumer, uncertain consumer and enterprise.
5:29 Steeper decline in gross margins than anticipated because new phones have become higher mix of product faster than anticipated.
5:32 Jim B. is back. Strong Black Friday and holiday buying season. RIM well positioned for industry shift to smartphones. Q&A to begin.
5:33 How much conservatism building in? How long hero agreement with VZ, VOD? Greater than historical seasonal declines? High percentage of orders already booked in Q4. Elements of seasonality, but particularly good visibility because of extended orders for hot new products.
5:35 Storm volumes “really quite surprising.” Really extended high deliveries well throughout Q4. “Lots of legs” on promo deal.
5:37 Warranty: Standard policy how we handle warranty for new products. No change in that policy. Intl vs NA: Pricing on product is typically the same in region.
5:38 Pricing discounts sooner than expected? No.
5:42 Margin expected on hardware? And other? Hardware margins low 30s? Don’t break them out to that degree of granularity. But yes, hardware down.
5:44 A bit of a land grab phase going on in the market. We know this. Also know that we’ve previously worked cost down over time. Some new revenue streams coming in, not the least of which is app store. Aim to enhance the margin. Will I guide now? In a stable place now? Yes. Think very strong and stable.
5:48 When Storm on sale beyond Verizon? What portion to Nov. shortfall to economic vs. delay in products? I think shortfall in subs was half/half, but principally revenue was much stronger to delay in products. “Otherwise, why are we just rocking it out so hard in December?” Hilarious!
5:51 If you knew roadmap of products, unique designs, enhanced componentry, how special it is for different partnerships, a rich roadmap for ’09 and ’10 that would blow you away.
5:52 Can’t comment on specific stuff. Very deep and special partnership worldwide with Verizon and Vodafone.
5:53 Any one-time events in Q4? Nope, “this is flow.”
5:56 Never seen such a mix to new products so quick. Tells me industry is in rapid transition to platform imperative, performance imperative of smartphones. Broad deployment of smartphones.
6:00 Are carriers making more money per user? My dealings is they like making more money per user.
6:02 Commitment to carrier as platform, not dumb pipe. Good luck with that!
6:04 Call over.
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