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RIM Surges After Forecasting Sales Above Analysts' Estimates

Research In Motion Ltd., maker of the BlackBerry smartphone, climbed in Nasdaq trading after forecasting revenue and profit that exceeded analysts’ estimates, buoyed by expectations for its new Torch phone.

The Torch “is an excellent step forward,” Co-Chief Executive Officer Jim Balsillie told analysts yesterday on a conference call. “The promo campaigns are just starting. That’s why you have seen the jump in guidance.”

Revenue this quarter will be as much as $5.55 billion and earnings per share will be as much as $1.70, RIM said in a statement yesterday. Analysts had projected revenue of $4.82 billion and profit of $1.39 a share.

RIM is battling Apple Inc.’s iPhone and a slew of handsets based on Google Inc.’s Android software from Motorola Inc. and HTC Corp. RIM said it shipped 12.1 million devices last quarter, 45 percent more than a year earlier, and expects ship 13.8 million to 14.4 million phones this quarter.

“RIM is not done by far and that they still have corporate America to use as a launching pad, even if iPhone and Android are starting to attack their market share” said Michael Yoshikami, chief investment strategist with YCMNet Advisors in Walnut Creek, California, who doesn’t own the company’s shares.

RIM, based in Waterloo, Ontario, rose 23 cents to $46.72 at 4 p.m. New York time on the Nasdaq Stock Market after gaining as much as 4.8 percent early in the session and then dropping as much as 1.1 percent. The stock has lost 31 percent this year.

Sales last quarter rose 31 percent to $4.62 billion. Analysts had predicted $4.49 billion, the average of estimates compiled by Bloomberg. Earnings per share were $1.46 compared with an average estimate of $1.36, excluding some costs.

Market Share

RIM’s global share of the smartphone market slid to 18.2 percent in the second quarter from 19 percent a year earlier as Apple’s share rose to 14.2 percent from 13 percent, while Android surged to 17.2 percent from 1.8 percent, according to researcher IDC.

RIM added 4.5 million net new subscribers last quarter, missing analysts’ projection for 5 million.

“That’s a troubling sign,” said Colin Gillis, an analyst with BGC Partners LP in New York, who initiated coverage of RIM this month with a “sell” rating.

Matt Thornton, an analyst at Avian Securities LLC in Boston, cut his rating on RIM to “neutral” from “positive” today, citing concerns about North America subscriber additions. “We expect RIM’s smartphone share in North America to fall markedly” in the second half of its fiscal year, he said.

High-End Products

Investors may have been overly focused on the high end of the smartphone market, particularly in the U.S., where RIM has lost share to rivals, and not focused on international growth, said Tero Kuittinen, an analyst at MKM Partners in Greenwich, Connecticut.

“Not everyone lives on Madison Avenue,” said Kuittinen, who has a “buy” rating on the stock. “In New York and San Francisco, RIM isn’t moving as much high-end product. But 80 percent of the world is prepaid, and this summer RIM had a lot of success with cheaper products like the Pearl and the new Curve” in markets such as Brazil and Indonesia, he said.

Balsillie told analysts that “excellent performance” in Latin America and Asia were “strong” drivers of growth last quarter.

The Torch, a touch-screen model that went on sale in the U.S. with AT&T Inc. last month, has received mixed reviews and generated lukewarm sales, analysts said before the results. Balsillie rejected that notion in his remarks to analysts.

“Based on sell-through after the first three weeks of launching with AT&T, Torch is the most successful launch in RIM’s history,” he said. He declined to give actual sales figures.

‘Strategic Extensions’

Balsillie hinted that the company may introduce new products or innovations at the BlackBerry Devcon conference in San Francisco, which starts Sept. 27. Attendees will see “strategic extensions” and new “aspects of design philosophy” at the event, he said.

Short sellers had bet RIM would continue to struggle against Apple and Google. Short interest in RIM had climbed to 31.1 million shares as of Aug. 31, more than double the level on April 15, according to data compiled by Bloomberg.

Net income climbed to $796.7 million from $475.6 million, or 83 cents a share, a year earlier. Gross margin, the percentage of sales left after production costs, is expected to be about 42 percent this quarter, down from 44.5 percent last quarter, the company said. The average selling price will climb from $304 last quarter to between $310 and $315 this quarter, the company said.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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