RIM 3Q Earnings Up on Subscriber Growth

TORONTO - Research in Motion Ltd., the maker of the BlackBerry wireless messaging device, released better than expected third quarter results on Wednesday — quelling some fears that an ongoing patent dispute that threatens to shut down the popular service in the United States is significantly hurting the business.

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Net income rose to $120.1 million, or 61 cents per share, from $90.4 million, or 46 cents per share. Revenue rose 53 percent to $560.5 million from $365.9 million and was above analysts' forecasts of $549 million.

Adjusted net income of 71 cents per share topped the 65-cent mean estimate of analysts surveyed by Thomson Financial.

"The business is really soaring. It's not just doing OK. It's soaring," James L. Balsillie, RIM's chairman and CEO told The Associated Press in an interview. "A lot of people have said `Wow, I thought it was all kind of tough,' but we've been telling everybody sales are fine."

RIM said it added 645,000 new subscriber accounts — about 25,000 less than projected after the company released its second quarter results — during the third quarter and at the end of the quarter total BlackBerry subscribers were 4.3 million — more than double than last year.

RIM maintained its forecast for earnings of 76 cents to 81 cents per share for the fourth quarter on revenue of $590 million to $620 million, but lowered its forecast for subscriber additions to a range of 700,000 to 750,000 — about 75,000 less than previously expected.

Dennis Kavelman, RIM's finance chief, said the uncertainty and publicity surrounding the legal patent dispute caused the reduced forecast.

"The impact of this has been to create some uncertainty among customers. The timing of any resolution and the removal of this uncertainty is difficult to predict, therefore taking into these factors we believe it is prudent to lower the range," Kavelman said.

RIM's stock has been battered by litigation that pits it against NTP, a tiny firm that lays claim to the patent technology behind BlackBerry. And though most analysts believe the odds of an injunction shutting down the service is low, some of RIM's larger customers are nervous.

The market was keen to see if there's a reluctance to purchase the device but at least two analysts were impressed with the results.

"The results are definitely better than expected," said Barry Richards, an analyst with Paradigm Capital. "Even the subscriber additions are certainly better than feared. There's no doubt that the third quarter was better. The guidance for fourth quarter is slightly better than expected."

Deepak Chopra, an analyst with National Bank Financial, said the results alleviate at least some of the fears.

"If NTP can get resolved in the near future, and customers get to feel some comfort on the issue, the number of subscribers additions could really start to accelerate here," Chopra said.

RIM shares closed at $61.76, down 32 cents, on the Nasdaq Stock Market before its earnings were released. In after-hours trading, the shares gained $3.64, or 5.9 percent, to $65.40. The stock has traded between $51.90 and $87.95 over the last year as the Canadian company has continued to suffer defeats in the U.S. court system.

In 2002, a federal jury in Richmond, Va., sided with NTP in the patent infringement case, and RIM has since lost in the appeals process.

Now the case is back with U.S. District Judge James R. Spencer, who might issue an injunction as soon as February.

Earlier this year, a tentative $450 million settlement fell apart. Spencer last week ordered RIM and Arlington, Va.-based NTP to submit filings on the injunction by Feb. 1.

But RIM has been victorious in its dealing with the U.S. Patent & Trademark Office. The agency has preliminarily nixed the patents at the heart of the court case. It has yet to issue final rejections, however, and NTP can appeal if the patent office issues its final rejections before Spencer issues a possible injunction.

Most analysts expect the companies to eventually reach a settlement, with some estimating it could be as much as $1 billion.

The company said it was maintaining a previously recorded estimate of $450 million, which was based on an amount in a tentative deal that has been rejected, although it said the actual figure could be higher or lower.