For the second straight quarter, soaring earnings were not enough to satisfy Research In Motion investors worried about the prospects of lower profits to come.
RIM reported its second-quarter results Thursday, posting an 88 percent jump in revenue and a 72 percent jump in net income compared to last year. The numbers, US$2.58 billion in revenue and US$495.5 million in net income, were roughly in line with the company's own expectations but slightly below those of financial analysts.
But RIM revealed that its gross margins will be lower than usual for the next several quarters as it introduces new products that are slightly more expensive to build than its current models. In addition, the U.S. launches of the BlackBerry Bold and the BlackBerry Pearl Flip will come a little bit later in the company's third quarter than it had expected earlier in the year, meaning they will contribute a little less to this quarter than RIM had anticipated.
That news sent RIM's stock down around 20 percent in after-hours trading as investors digested the news. RIM's gross margins are pretty solid, at around 50 percent, but they are heading down into the mid-40s as the company starts building the more expensive handsets in large volumes.
Still, RIM co-CEO Jim Balsille was not worried about his company's prospects heading into the rest of the year, on a conference call following the release of RIM's numbers. Balsille compared the current market for smartphones as a bit of a "land grab"--the same term he used last quarter--and said RIM would regret missing out on the opportunity to take advantage of demand for smarter mobile phones if it was not willing to take a bit of a cost hit through more sophisticated hardware and increased marketing expenses.
During the upcoming quarter the BlackBerry will be the centerpiece of several so-called "hero" campaigns launched by partners, presumably carriers and software developers, Balsille said. "Everyone has a hero campaign where we are a featured or the featured device for the holiday season," he said.
RIM has been trying to expand its footprint beyond the enterprise to consumers, the target for devices like Apple's iPhone. Right now, consumers make up 42 percent of RIM's subscriber base, but more than half of all new subscribers in the second quarter were consumers, Balsille said.
BlackBerry sales were roughly in line with what Wall Street analysts had expected, at 6.1 million units shipped, but below some of the more optimistic estimates.
This article was first published as a blog on CNET News.com.
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