RIM Gains Market Share

Research In Motion Limited (RIM) (NASDAQ:RIMM; TSX: RIM), a leading mobile phone vendor with annual revenue of $11.07, billion beat estimates for its first quarter. Close on the heels of the Palm Pre and the iPhone 3.0, this week RIM unveiled the BlackBerry Tour. And although Palm and Apple are heating up the convergence device race, RIM still seems to be on top with 55% share of the US smartphone market; Apple is at a distant 19.5%. Let’s take a closer look.

Q1 revenue was up 53% to $3.42 billion on shipment of 7.8 million devices driven by Verizon’s Buy One Get One Free campaign. Net income was $643.0 million or $1.12 per share versus $482.5 million, or $0.84 per share last year. Adjusted net income was $564.4 million, or $0.98 per share. Analysts expected earnings of $0.94 on revenue of $3.5 billion.

RIM added 3.8 million net new BlackBerry subscriber accounts and ended the quarter with 28.5 million subscribers. Device ASPs were approximately $357, in line with guidance and lower than Q4 due to shifts in produce mix.

RIM ended the quarter with $2.42 billion cash. Gross margin was down from 50.7% last year to 43.6%. With more and more product launches to keep up with competition, RIM’s gross margin has taken a toll. Last quarter it was just 40%, and it is only due to the company’s cost-cutting measures that the margin has improved this quarter.

Despite the iPhone’s unique interface and OS, RIM continues to gain market share because of its successful BlackBerry platform that is extremely popular with prosumers and now with consumers, too. This quarter, about 80% of net subscriber additions were non-enterprise and accounted for about 50% of the BlackBerry’s subscriber base. The recently launched BlackBerry App World has had some 15 million downloads of social networking applications. In my last post, I said RIM should focus on developing applications for the enterprise, its stronghold and the iPhone’s weak point. RIM has recently made available push APIs that developers can use to create real-time push content like Hockey News and Pocket Express.

RIM recently announced the BlackBerry Tour, which has a QWERTY keyboard. And though the company’s market share is not likely to be at stake in the near future, I hope that like Palm with its Palm Pre, RIM also comes up with an improved operating system and interface – that would really heat up the convergence device race.

For the second quarter, RIM expects revenue in the range of $3.45-$3.70 billion and EPS of $0.94-$1.03, in line with Street expectations. Gross margin is expected to be 43-44%. Net subscriber account additions are expected to be in the range of 3.8-4.1 million. The stock is currently trading around $77 with market cap of about $43 billion. It hit a 52-week high of $83.77 on June 10. I had earlier explored the possibility of a merger with Dell.