Research in Motion (RIMM), the maker of the popular BlackBerry device, earned a Bronx cheer from investors Thursday after the company announced second quarter earnings that fell short of Wall Street expectations. Also disconcerting: the company issued a revenue forecast for the current quarter below what analysts had anticipated.
RIM shares hit free-fall seconds after the announcement, plunging nearly 10 percent in after-hours trading. The company's poor showing is a slap in the face of Wall Street analysts who had been raising their RIM projections for last quarter and the current period amid growing buzz across the hand-held sector over the summer.
RIM's lackluster results highlight the continued weakness in consumer and business spending, as well as fierce competition in the wireless space from Apple's (AAPL) wildly popular -- if recently network-challenged -- iPhone, as well as Palm, the resurgent smart-phone maker.
"It wasn't a blow out quarter," Nick Agostino, an analyst with Research Capital, told the AP. "I think it will add fuel to the competition concerns."
On the plus side, RIM's revenue jumped 37 percent to $3.53 billion. But profit slipped. The company said it earned $475.6 million, or 83 cents a share, versus $495.5 million, or 86 cents a share, in the year-ago period.
Nevertheless, as is custom, RIM Co-CEO Jim Balsillie tried to spin the numbers in a positive light.
"We are pleased to report a strong second quarter with excellent financial performance, successful product launches and accelerating growth in international markets and new market segments," Balsillie said in a statement.
But some analysts suggested that all the hype surrounding new mobile phone launches had gone too far.
"People got far too giddy about this industry over the past three months," MKM Partners analyst Tero Kuittinen told TheStreet.com after the earnings report. "It's time to wake up."
Despite strong sales of its popular BlackBerry phones, RIM said that its earnings fell four percent in its second fiscal quarter, thanks in large part to a $112.8 million settlement over a patent dispute with Visto over wireless email technology. Without the charge, RIM said it would have earned $588.4 million, or $1.03 per share, meeting or slightly exceeding expectations.
The company said it added 3.8 million new subscribers during the quarter and moved some 8.3 million devices. But analysts had expected four million new subscribers with shipments between 8.5 million and 8.6 million.
Looking ahead, RIM disappointed Wall Street by predicting that this quarter's sales will be $3.6 billion to $3.85 billion. Analysts had expected an revenue forecast of $3.91 billion.
This after many analysts expressed heightened expectations for both periods. Shares are down 12.5 percent after hours.
Gross margins picked up a hair from the May period to 44.1 percent, but were still down significantly year-over-year, and RIM predicts they will fall to 43 percent next quarter.
RIM blows earnings, investors punish shares