RIM Reports Weak Q3 Earnings As Concerns Over Company's Future Mount

Ontario-based RIM reported a third quarter revenue of $5.2 billion, up 24 percent from the $4.2 billion it reported in the second quarter, but down 6 percent from the $5.5 billion from one year ago. The company’s net income for the quarter was a modest $265 million, down significantly from the company's $911 million income one year ago. RIM said that 79 percent of its third quarter revenue could be attributed to hardware sales, while service offerings accounted for 19 percent and software for 2 percent. During the quarter, the company shipped approximately 14.1 million BlackBerry smartphones, and a meager 150,000 BlackBerry PlayBook tablets.

RIM announced earlier this month that it would be recording a pre-tax provision of $485 million due its lackluster PlayBook sales.

RIM acknowledged its third quarter struggles but also offered a bit of optimism, announcing its subscriber base grew 35 percent year-over-year to nearly 75 million customers worldwide.

"Despite the challenges faced in the third quarter, the BlackBerry subscriber base grew to almost 75 million customers around the world. In addition, RIM launched a range of new BlackBerry 7 based smartphones globally and introduced holiday promotions that helped drive growth in the installed base of BlackBerry PlayBook users," said Jim Balsillie and Mike Lazaridis, Co-CEOs at Research In Motionm, in a statement. "RIM continues to have strong technology, unique service capabilities and a large installed base of customers, and we are more determined than ever to capitalize on our strengths to overcome the recent execution challenges surrounding product launches and the resulting financial performance."

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According to a Wall Street Journal report, however, it may take more than determination for RIM to get back on its feet. The company's weak earnings brought its stock to new lows in after-hours trading, leading shareholders and analysts to again question how the BlackBerry brand will ever compete against industry powerhouses Apple and Google.

BlackBerry service providers, it seems, are asking the same question. Tim Shea, CEO of Alpha NetSolutions, a Millbury, Mass.-based service provider, told CRN that RIM’s fall from its top spot in the corporate mobility market can be attributed, quite simply, to a lack of innovation. In light of its initial success, Shea explained, RIM became too comfortable, sat back, and let the likes of Apple and Google get ahead.

"They became too comfortable with the marketshare, too comfortable with their products, and stopped innovating,” Shea told CRN. “I think the iPhone should’ve woken them up. And the Droid just pushed them into the dirt."

What’s more, Shea said, as more and more Apple or Android devices move from the consumer to the corporate world, it’s only going to get harder for RIM.

"Even the accounts I have that were very BlackBerry-centric have had an iPhone or Droid or two that have slipped in the gates," he said. "And at that point it’s only a matter of time."

RIM said that it expects fourth quarter revenue to be in the range of $4.6 billion to $4.9 billion. BlackBerry smartphone shipments in the fourth quarter are expected to be between 11 million and 12 million, which is even lower than the 14.1 million devices the company shipped in the third quarter.