RealTime IT News

Rim, Palm a Tale in Smartphone Contrasts

Smartphone makers Research In Motion and Palm announced quarterly earnings yesterday on par with pre-quarter expectations.

But that's where the financial similarity ends. RIM (NASDAQ: RIMM) is expecting a robust holiday selling season; co-CEO Jim Balsillie called it the company's best ever. Palm (NASDAQ:PALM), meanwhile, reported less than stellar revenues and faces market challenges that will extend into 2009.

RIM reported $2.78 billion third quarter revenues, a 66 percent spike compared year-to-year with the third quarter of 2007 and shipped 6.7 million BlackBerry devices in the quarter.

It earned $396.3 million, or 69 cents a share, representing a healthy profit jump from $370.5 million, or 65 cents a share, in the same quarter of 2007.

RIM added 2.6 million subscribers during the quarter and attributed growth to new BlackBerry devices, including the Storm, its top iPhone competitor that launched during the quarter. The overall subscriber base increased 14 percent in the third quarter, according to RIM.

Balsillie said November 21, the date the BlackBerry Storm launched, resulted in the biggest subscriber signup day in the company's history.

About 60 percent of the quarter's new subscribers are consumers, said the company. Non-enterprise users now account for 45 percent of RIM's total user base. During its earnings call late Thursday RIM said it has 425 carrier and distribution partners in over 150 countries.

The forecast for the fourth quarter is just as bright for the Waterloo, Ontario-based company. It expects fourth-quarter revenue of $3.3 billion to $3.5 billion, and earnings per share of 83 to 91 cents. That's higher than Reuters Estimates expectations of $2.97 billion in revenue, which reflects a share increase of 83 cents.

RIM said it expects to boost its subscriber figure in the fourth quarter by 2.9 million, and sell between 7.5 million and 8 million handsets.

RIM also announced it is expanding its retail channel with a partnership with Target which will pilot BlackBerry sales in the next few months.

Plans for its official mobile application storefront to open in early 2009 are on target. RIM's "on-device application center," will let developers set their own application price and retain 80 percent of revenues.

During the quarter RIM launched several social networking initiatives providing users MySpace and Facebook applications. Both are successful, with over 1 million MySpace downloads within the first month. RIM said there have been over 5 million downloads of the Facebook application -- double the number from the second quarter.

The healthy revenue and handset news stirred up positive shareholder activity in after hours trading for RIM, as shares spiked nearly 10 percent at one point late Thursday.

A Not So Rosy Picture for Palm

Meanwhile Palm reported a dip in smartphone unit sales and revenue for its second quarter of fiscal year 2009.

Palm's revenue was $191.6 million, a 45 percent drop from $349.6 in the first quarter.

Palm reported a net loss for the quarter of $80.2 million, a loss of 73 cents per share. Its first quarter loss was $12.8 million

Analysts expected a loss of 38 cents on sales of $207.3 million, according to polling by Thomson Reuters.

Smartphone sales for the quarter were 599,000 devices, a drop of 13 percent compared to last year's second quarter.

Shareholder response to Thursday's numbers was swift. Palm's stock dropped 13.64 percent, or 30 cents, in after hours trading to $1.90 after closing at $2.20 during regular trading yesterday.

Palm CEO Ed Colligan told investors during the earnings call that his company is facing a myriad of issues.

"There is a new Palm OS architecture and a product line [Centro] that is maturing, consumer spending is down, and expenses associated with new products still in development have yet to impact our revenues," Colligan said.

Palm expects continuing challenges going forward but believes its new OS and handsets will turn its fiscal tide toward better results by 2010.

"We are taking the necessary steps to get through this transition period but the factors that pressured our second quarter results are still in play and given this, we expect the next couple of quarters to be challenging, particularly the February quarter," said Colligan.

"On our last earnings call, we told you that Centro’s maturing lifecycle and the time needed to ramp our Treo products would pressure results. These factors have been amplified by the deteriorating economic climate, impacting results more significantly than we had anticipated," said Colligan.

During the quarter Palm debuted a high-end smartphone, the Treo Pro through and said it expects to open a new channel with another major US carrier in the next quarter.

Colligan said Palm's new OS, based on a Linux core system, will let the handset maker develop hardware and software in tandem, which will provide a competitive advantage, with carriers and consumers.

"Owning both elements will result in a better smartphone and give us the control and flexibility necessary to support new applications and services," said Colligan. He's got a healthy ecosystem still in place to build for: some 30,000 applications for the current Palm OS.