Research In Motion's Higher Earnings Miss Wall Street's Expectations

Research in Motion's stock tumbled after its quarterly earnings missed Wall Street's expectations.
Research in Motion's stock tumbled after its quarterly earnings missed Wall Street's expectations.

BlackBerry-maker Research In Motion (RIMM) may finally be feeling the effects of intense competition in the smartphone market from Apple's (AAPL) iPhone and Google's (GOOG) insurgent Android OS. Investors seem to think so, selling off RIM shares in the aftermath of a quarterly earnings announcement that fell short of Wall Street's expectations.

Although the company announced an 18% revenue gain and higher profits, RIM shares tumbled over 7% in after-hours trading. For the fourth fiscal quarter, RIM reported earnings of $710.1 million, or $1.27 per share, barely missing analyst estimates of $1.28 per share. RIM earned $518.3 million, or 90 cents a share, one year ago.

Until now, RIM has managed to hold its ground, unlike weaker rivals like Palm (PALM). RIM's share price has more than doubled since its March 2009 low point.

"Device shipments were disappointing in the February quarter as expectations rose in the last quarter," James Faucette, an analyst at Pacific Crest Securities told CNBC right after the numbers came out.

Threats on the Horizon

Despite its success to date, there are threats on the horizon for RIM. One potential challenge is the possibility that Apple could release an iPhone that works on Verizon Wireless's network. Another is threat is HTC's increasingly popular line of mid-market phones, many of which run on the Android system.

But so far, RIM has managed to avoid the increasingly bitter mobile war between Apple and Google. RIM has been buoyed by strong foreign sales, which make up about half of its revenue. Last quarter, RIM reported a 58% earnings jump, sold a whopping 10.1 million handsets and added 4.4 million new subscribers.

RIM's lackluster results surprised bullish analysts.

"The unanimous expectation is for a beat," Matt Thornton of Avian Securities wrote in a note cited by MarketWatch Wednesday. The analyst said that "unit whisper numbers are likely at/above the high end of the guided range, setting a high hurdle."