UPDATE 4-BlackBerry Torch lights up RIM results, forecasts

Thu Dec 16, 2010 7:54pm EST

* RIM Q3 EPS $1.74 vs average analyst estimate $1.65

* Revenue of $5.5 billion, vs avg estimate $5.4 billion

* Ships 14.2 mln BlackBerrys, adds 5.1 mln subscribers

* Shares rise as much as 3 percent in after-hours trade

(Adds detail from conference call; In U.S. dollars)

By Alastair Sharp

TORONTO, Dec 16 (Reuters) - Research In Motion's RIM.TO Torch, a touchscreen challenger to Apple's iPhone, lifted the BlackBerry maker's quarterly profit above analyst expectations on Thursday, and the company forecast strong results for the current holiday-season quarter.

RIM RIMM.O said net profit jumped 45 percent in its third quarter as it leaned harder on growth from outside of North America. Its shares rose as much as 3 percent in after-market trade.

The Torch, which combines RIM's trademark mini-keyboard with the glitzier touchscreen, shipped to more than 75 carriers in the quarter after an August launch with AT&T (T.N) in the United States. AT&T's half-price promotion from early November also helped sales. [ID:nN09157390]

"The results look pretty good. For the current quarter they definitely benefited from some new products. ... The guidance also looks quite strong," said Shaw Wu, an analyst at Kaufman Bros in San Francisco.

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For a Reuters Insider preview [ID:nRTV172556]

Interview with co-CEO Mike Lazaridis [ID:nN29230611]

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That said, Wu took note of a nagging fear among investors that RIM's long-term prospects are limited as it competes against the likes of Apple (AAPL.O) and Google (GOOG.O), whose Android software is used in devices made by Motorola MOT.N, Taiwan's HTC Corp (2498.TW) and South Korea's Samsung (005930.KS).

"There is some concern that (RIM's guidance) could be too optimistic perhaps because of the ongoing pressure, particularly from Android, in international markets," Wu said.

The Canadian company said it expects to earn between $1.74 and $1.80 per share in the December-to-February quarter, sharply higher than analysts had expected. It expects revenue between $5.5 billion and $5.7 billion.

For the most recent quarter, it reported net profit of $911.1 million, or $1.74 per share, on revenue of $5.49 billion. The figures handily beat the average estimates of analysts, who had expected earnings of $1.65 a share and revenue of $5.4 billion, according to Thomson Reuters I/B/E/S.

RIM shipped 14.2 million BlackBerry smartphones in the latest quarter, a figure that edged past average analyst expectations and also snuck past Apple's most recent iPhone numbers, a bone of contention between Apple's Steve Jobs and RIM co-CEO Jim Balsillie.[ID:nN19153504]

RIM made its name with secure, reliable communications for the world's business and government elites before branching out into what is now a crowded consumer market.

Markets outside of North America accounted for 48 percent of its subscriber base in the quarter. The company is targeting emerging markets such as Latin America and Southeast Asia with mid-priced devices and data plans, and "sticky" applications, such as BlackBerry Messenger, a free instant messaging service exclusiviely for users of the smartphones.

"There's clearly a big global market for communications devices that have consumer features that are good enough," said Matthew Robison at Wunderlich Securities in San Francisco.

Meanwhile, RIM's share of the North American smartphone market has shrunk to about 27 percent from more than 50 percent a year ago, according to Gartner Research. Android-powered devices have exploded out of nowhere and lead the market.

RIM said just a third of its revenue came from the United States in the quarter, compared to 57 percent a year ago, and analysts do not expect a quick reversal in RIM's fortunes.

"The concerns for this name don't go away - they don't go away with this quarter. What happens in the U.S. marketplace when the iPhone hits Verizon? (What happens) when the cheaper Android handsets start to crack into the international base," said Colin Gillis of BGC Partners in New York.

RIM added a net 5.1 million new subscribers, matching the average forecast for this key metric that helps illuminate how many sales are replacement devices for existing customers.

This is the last quarter RIM will routinely publish its net subscriber additions, a measure with no direct comparison for RIM's peers, which do not operate their own wireless network.

PLAYBOOK PLANS

While RIM is wooing consumers in emerging markets, it is also playing to its traditional strengths with the PlayBook tablet, a 7-inch model that will go head-to-head with Apple's iPad when it's launched next year.

The launch will likely coincide with updated versions of the iPad and with Samsung's Android-powered Galaxy Tab.

During a conference call after Thursday's results, co-CEO Jim Balsillie pointed to a March debut for the PlayBook. He said the tablet would ship in the first quarter of the next calendar year, but RIM would not book revenues from the device in its fiscal fourth quarter ending Feb. 26.

Analysts expect between 1.3 million and 8.4 million PlayBook sales for RIM's fiscal 2012.

RIM's share price has rallied since it launched the Torch with a revamped browser and improved operating system in August and showed off the PlayBook in late September. [IDnN27231916] After regular market trading on Thursday, the New York-listed shares rose to $60.58 from a $59.24 close before the results.

Balsillie, who along with co-CEO Mike Lazaridis was named on Thursday as a co-chairman of the company, shrugged off concerns about RIM's health, stressing mobile computing is in a state of flux.

"I'm fine just letting the proof be in the deliverables," he said. "We do keep delivering and we're going to keep delivering." (Additional reporting by Euan Rocha and Alex Dobuzinskis; editing by Janet Guttsman and Frank McGurty)

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