Research In Motion posted a big jump in profit and issued an even stronger outlook on Thursday, as sturdy demand from holiday shoppers helped the BlackBerry maker fend off the competition.
Shrugging off fears that Apple and other rivals were eating its lunch, Canada's top technology company said it shipped a record-breaking 10 million phones, sending its shares surging in after-hour trading.
The results not only surpassed expectations for the third quarter, but its forecast for the current quarter easily topped what most analysts were anticipating.
MKM Partners LLC analyst Tero Kuittinen said the sales outlook is a strong signal that RIM is successfully cracking into the consumer market.
That's a major positive surprise because people have been very skeptical about the February quarter, he said. People wrote off RIM too soon.
RIM is waging an aggressive push into the mainstream market in an effort to drive growth and diversify its customer base beyond business professionals who use the handsets for secure wireless email service. At the same time, it faces growing competition from such devices as Apple's iPhone and Motorola's Droid.
Investors had worried that growing sales of RIM's retail-friendly, lower-profit smartphones, like the Curve, would squeeze average selling prices and revenue.
Those fears were stoked by a disappointing outlook issued in September, which led analysts to cut forecasts and sent RIM's stock into a 17 percent tailspin.
That's a sharp contrast with Thursday's fourth-quarter forecast, which suggests the company's market share is not eroding as feared.
But even with the 12.6 percent rally in RIM's stock after Thursday's close, it still had not caught up with the September swoon.
The Waterloo, Ontario-based company expects earnings per share of $1.23 to $1.31 and revenue of $4.2 billion to $4.4 billion. It sees gross margin of about 43.5 percent and expects to add 4.4 million to 4.7 million new subscribers.
Before RIM issued that forecast, analysts had expected earnings per share of $1.12 and revenue of $4.1 billion, according to Thomson Reuters I/B/E/S.
For its third quarter, ended November 28, RIM said profit rose to $628.4 million, or $1.10 a share, from $396.3 million, or 69 cents, a year earlier.
Revenue increased 41 percent to $3.92 billion.
The results topped analysts' expectations for a profit of $1.04 a share and revenue of $3.78 billion.
Avian Securities analyst Matthew Thornton said RIM's sales of 10.1 million BlackBerry units handily beat his estimate of 9.5 million.
Expectations were pretty subdued going into the quarter because of all the competitive chatter, he said.
It's a very strong quarter, above their guidance range and certainly above analysts' execrations in terms of revenue, EPS, subscriber numbers and unit shipments.
The company, which earlier on Thursday grappled with a major service outage for some North American BlackBerry customers, added about 4.4 million subscribers in the third quarter, for a total of about 36 million customers.
Some analysts say competition concerns are overblown and reflected an underestimate of the ongoing growth of the smartphone market.
Of the 47 analysts covering RIM, 11 rate the stock strong buy, 14 recommend buy, and 17 analysts have a hold rating. Two analysts have a sell rating and three underperform.
That reflects a gloomier sentiment than two months ago, when 16 rated the stock buy, and three months ago when 18 had buy ratings.
RIM shares jumped 12.6 percent to $71.50 in extended trading on Thursday.
(Reporting by Susan Taylor, with additional reporting by Sinead Carew in New York; Editing by Frank McGurty)