RIM stock falls on forecast : Certicom board agrees to takeover

Shares of Research In Motion Ltd. plunged after the manufacturer said its quarterly earnings and gross margin would come in at the low end of expectations, despite better-than-expected subscriber growth.
The Canadian-based BlackBerry maker said it will exceed its previous forecast of 2.9 million net subscriber adds by more than 20% thanks largely to record subscriber growth in December and “strong levels following the holiday buying season.” But RIM said it expects revenue for the quarter to be “at or near the mid-point” of its December forecast of $3.3 billion to $3.5 billion, with gross margin and earnings per share “to be at the low end” of the previous forecast.
“A variety of factors, including product mix, lowered channel inventory levels and an increased ratio of new subscriber sales to upgrade and replacement sales, are contributing to the degree of outperformance in subscriber growth relative to revenue and earnings performance within the quarter,” RIM said in a prepared statement.
Indeed, analysts noted that while sales are up, RIM’s newer handsets aren’t delivering the high margins earlier devices generated.
“In our prior survey, we noted Storm returns potentially turning into Curve sales, though we had presumed this would help gross margins (despite a) lower ASP (average selling price),” UBS analyst Maynard Um wrote in response to RIM’s announcement. “New questions as to whether there is pricing pressure impacting gross margins, where the bottom margins are, and the outlook for hardware end demand are likely to be key issues. RIM expects the May quarter to see a more normalized average weekly run-rate as it is not expected to have a ‘holiday surge.’ We believe expectations were more optimistic (flat to up sequential) for both hardware and subscribers.”
Investors punished RIM following the news, sending shares down $9.29, or more than 16%, to $47.75.
Certicom goes to RIM
Meanwhile, Certicom Corp. agreed to be acquired by RIM for roughly $106.5 million, apparently ending weeks of a struggle for the software security company between RIM and VeriSign Inc. RIM, which last month aborted an attempted hostile takeover of Certicom, doubled its previous offer and significantly outbid VeriSign’s proposal from two weeks ago.
At the heart of the bidding war is Certicom’s elliptic curve cryptography (ECC), technology, which is regarded as a highly efficient form of public-key cryptography enabling high-performance data security.
“The board of directors of Certicom has concluded that the RIM transaction is the in the best interests of the corporation,” said Certicom board chairman Jeffrey Chisholm, “and unanimously recommends that shareholders of Certicom vote in favor of the (bid) at the shareholders’ special meeting to be held in respect of the RIM transaction.”