Research In Motion lost less money than expected during the third quarter, but analysts were disappointed once they got a closer look at the company’s earnings report. RIM’s shares started to move higher when the company announced a loss of $114 million on revenue of $2.7 billion, but investors soured on the stock once CEO Thorstein Heins started taking analysts through the specifics in a conference call. The stock was down 17% on Friday morning.
Heins said RIM is under pressure to reduce the fees it charges carriers, and that those fees will change with next month’s launch of BlackBerry 10. RIM is the only smartphone maker that maintains a proprietary network, and carriers must pay a fee to let their subscribers access that network. Those fees currently generate about one-third of RIM’s worldwide revenue.
“We expect service revenue in North America, which we estimate to have been roughly $450 million in fiscal third quarter, will begin to decline more rapidly once BB10 is launched and both consumer and enterprise customers receive new pricing plans,” said analyst Kevin Smithen of Macquarie Securities. The firm is predicting a 40% drop in RIM’s North American service fees next year.
But Smithen says international service revenue probably won’t decline as quickly. “We believe that BB7 services plans in international markets won’t be repriced any time soon, and that international service revenue will erode far less quickly than in North America,” said Smithen.
RIM hopes to offset some of the decline in North American service fees with revenue from its new BlackBerry Mobile Fusion offering. The software extends RIM’s strength in mobile security to iOS and Android devices.
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