BlackBerry maker Research In Motion Ltd. breezed past investor and analyst expectations in delivering its second-quarter results on Thursday and forecast strong growth in subscribers for the future, sending its shares soaring in after-hours trade.
The Waterloo, Ontario-based company reported a net profit of $140.8 million, or 74 cents a share, for the three months ended September 2. That compared with a profit of $111 million, or 56 cents a share, for the same period a year earlier.
Adjusted to exclude regular stock option expenses, RIM reported a profit of 77 cents a share. Revenue was $658.5 million, up from $490 million in the same period a year earlier - a jump of 34 percent.
Analysts surveyed by Reuters Estimates had expected a profit of 71 cents a share before exceptional items, on revenue of $643.63 million.
Peter Misek, an analyst at Canaccord Adams in Toronto, called the quarterly results and guidance awesome.
They just smashed the numbers, smashed them, Misek said.
The results, as well as strong forecasts for the upcoming quarter, lifted RIM shares, which hit $102.55 in after-hours trade, up 19 percent from the $86.06 regular close on Nasdaq. The level was just shy of the stock's all-time high.
Investors also got a taste of market reaction to RIM's new multimedia-heavy BlackBerry Pearl device, which was launched earlier this month through T-Mobile in the United States.
The response to the product has been exceptional, co-Chief Executive Jim Balsillie said during a conference call with analysts. Net subscriber account additions at T-Mobile in the weeks following the launch were significantly higher than we'd been seeing prior to the Pearl launch.
The Pearl, with music and camera functions in addition to the wireless e-mail capabilities the BlackBerry is already famous for, is aimed at the broader consumer market as opposed to the corporate clients RIM had largely focused on.
We believe we may have one of the most successful BlackBerry products ever on our hands, Balsillie said, adding RIM's other carrier partners around the world are all eager to move forward with launch plans for the Pearl.
Analyst forecasts on the potential market for devices like the Pearl have been enormous. Others, however, have warned that RIM is on a collision course with the likes of Nokia and Motorola in the battle for high-end consumers.
Motorola, like other handset vendors, has its own smartphone, the Q, which some have said could pose a threat to the Pearl. Balsillie, however, characterized predictions of new competition as misinformation.
One has to understand that most of these companies that are mentioned have been bringing ... their best game to this space for over a decade, he said. So this kind of competitive reality (has) really been there from the beginning, when we didn't have anything like the resources and position and capacity and experience and so on that we have today.
RIM said the second-quarter results were preliminary, pending a potential restatement related to non-cash charges associated with past option grants.
But it said it believed the potential impact of any restatement would be immaterial for quarters in fiscal 2007.
The company forecast about 800,000 subscriber additions for the third quarter and said it expects third-quarter revenue to be between $780 million and $820 million. RIM forecast net profit in the range of 88 to 95 cents per share.
Canaccord's Misek said the potential restatement appeared to be completely immaterial in terms of amount.
RIM said it expected its voluntary review of historical stock-option grants to employees to increase non-cash charges associated with past option grants, and cut previously reported GAAP earnings by some $25 million to $45 million over the period since its initial public offering in 1997.