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RIM misses analysts' forecast
Shares take hit in after-hours trade
April 19, 2005
Toronto Star

Research in Motion Ltd. shares fell 7 per cent yesterday in after-hours trading when the company failed to meet analyst's expectations despite a surge in sales and posted a fourth-quarter net loss of nearly $2.6 million (U.S.).

RIM, which is best known for its BlackBerry wireless device, reported a loss of 1 cent a share in the period ended Feb. 26, after taking into account an expensive out-of-court settlement.

That compared with net income of $41.5 million, or 23 cents a share, in the corresponding 2004 period.

Executives and some analysts remained optimistic, however.

"We've become so spoiled," said Barry Richards, wireless analyst Paradigm Capital. "For quite a few quarters we had better-than-expected everything."

This time around shipments were lower than expected, but revenues were still up more than 92 per cent for the quarter, year over year.

RIM, which reports results in U.S. dollars, said fourth-quarter revenue were $404.8 million. That was within the firm's own guidance but less than analysts' expectations of $410 million, according to Thomson First Call.

Richards said he believes the Waterloo-based company compensated for the loss by making more money than expected on software upgrades and attracting so many new customers.

According to RIM, the subscriber base grew by 470,000 in the fourth quarter to approximately 2.51 million, up 135 per cent year over year.

"There is no question that we continue to be very encouraged by the ramp up in our subscriber growth," said Jim Balsillie, RIM's chairman and co-chief executive officer. The company also overcame a major legal hurdle in the quarter.

In March, RIM agreed to pay NTP Inc. of Arlington, Va., $450 million to settle a patent dispute. In addition to covering all outstanding claims, the out-of-court settlement stops NTP from pursuing any future patent litigation against RIM. It also gives RIM a fully paid licence for NTP's patents.

Analysts were pleased with the settlement, despite the high price, because it ends a long-standing legal battle and puts to rest fears that the company might not be able to sell its devices in the U.S.

RIM's stock still took an initial hit following yesterday's announcement, falling by as much as $5.20 in after-hours trading in New York before gaining back some ground. The shares ended regular trading prior to the financial report at $74.40 on the Nasdaq Stock Market, down 75 cents from Monday, in the Toronto, down 76 cents.

"There are going to be some people that will be a bit disappointed (by lower-than-expected shipments)," said James Faucette, senior equity analyst Pacific Crest Securities.

The total number of units shipped fell short of targets by 50,000 to 90,000, he said, adding, "That's a pretty big deal."

But Faucette said it's too soon to say whether the shipment figures are "a harbinger of slower growth ahead."

Richards wasn't too concerned and said it was simply a matter of wireless carriers trying to keep tighter inventory.

Revenue for fiscal 2005 was $1.35 billion (U.S.) - more than double the $594.6 million in 2004. Net income was $213.4 million, or $1.09 per diluted share. That's up from a fiscal 2004 net profit of $51.8 million, or 31 cents a share.

RIM said its profit in the current quarter will be less than the company estimated in December and below analysts' recent estimates due in part to a higher tax rate than initially expected in the quarter - another factor related to the NTP settlement.

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