RealTime IT News

What Uncertainty? BlackBerry Demand Remains High

Wireless device maker Research in Motion said demand for its e-mail device remains strong despite analysts' fears that a crucial patent loss could chase enterprise customers away.

The Canadian firm, which was slapped with a 53 million patent infringement judgment recently, said preliminary results show second quarter revenues will be in the range of $123 million to $126 million, much higher than original estimates of between $105 million and $115 million.

The company, which markets the BlackBerry wireless e-mail device, said second quarter net income would also exceed initial forecasts.

Excluding the patent litigation provision, RIM expects adjusted diluted earnings to be between 7 cents and 11 cents per share.

More importantly, the company expects the number of net new BlackBerry subscribers in the quarter to be between 94,000 and 97,000, much higher than earlier forecasts 80,000 to 90,000 for the second.

Immediately after the penalty phase of the patent infringement suit was filed against RIM by Virginia-based NTP Inc., analysts warned that the fallout from the legal loss would hurt RIM's push into the enterprise market. The judgment included a ruling that RIM must cease selling its flagship BlackBerry handheld devices in the U.S. -- its largest market.

The immediate impact of the ruling was stayed to allow RIM to file an appeal but Jupiter Research analyst Michael Gartenberg reckoned that fear and uncertainty would hit the company hard. "This is not good news for RIM as the U.S. is their largest market. Even though the judge did not execute the injunction effective immediately, the fear and uncertainty will likely have many corporate users looking to competitive solutions," Gartenberg said.

When final second quarter results are reported on September 25th, RIM expects the BlackBerry subscriber base to be in excess of 700,000.

Gartenberg said large enterprises, which make up the most valuable customer base for RIM, would likely start looking at competing devices from the likes of Microsoft, Good Technology, Palm and Visto if the legal proceedings drag on.

However, in a statement, RIM insisted demand for its products remained high. "RIM's business generated higher than expected revenue during the summer months resulting in a record quarter. The top-line growth together with prudent expense management also allowed us to significantly exceed our profitability targets," said RIM chief financial officer Dennis Kavelman.

In a statement, Kavelman said global demand for BlackBerry accelerated in both enterprise and consumer market segments. He said RIM fulfilled orders to its carrier partners during the most recent quarter to satisfy new subscriber growth, hardware upgrade sales and retail channel expansion requirements.

Separately, RIM announced the availability of its S/MIME Support Package v1.5 for BlackBerry. The company said the software add-on would provide S/MIME authentication support for Java-based BlackBerry devices.

S/MIME, or Multipurpose Internet Mail Extensions, is a standards-based protocol for formatting non-ASCII messages so that they can be sent over the Internet. It uses public key cryptology to provide writer-to-reader security features such as authentication and confidentiality message integrity.