Anyone looking for Research in Motion to stumble - at least in the short term - will likey be disappointed when the company reports its fiscal second-quarter results this week. According to Merrill Lynch, RIM should post revenue of US$305 million, 13% higher than the first quarter and a 143% increase from a year ago. Pro forma earnings are expected to come in at US42 cents, compared with 5 cents last year. Merrill Lynch analyst Pat Chiefalo cites the following reasons for RIM's strong performance:
- RIM continues to expand effectively in North America and Europe;
- More carrier customers around the world are coming onboard;
- More subscribers are upgrading their existing devices.
It will be fascinating to see how RIM's new 7100T handheld, which looks more like a telephone than a e-mail device, will affect the company's fortunes. The 7100T is an aggressive push into the so-called "prosumer" market, which means RIM wants to sell more devices to people who aren't CEOs or CIOs or CFOs, and people who pay their own wireless bills each month. The carriers are totally enthusiastic because RIM devices do not have to be heavily subsidized and they generate more revenue per month - otherwise known as ARPU - than wireless phones. The challenge for RIM and the carriers is convincing consumers to pay $70, or $80 or $90 for the convenience of having a wireless phone and access to e-mail. This could prove particularly challenging in the U.S. where intense competition has allowed consumers to enjoy fairly low wireless prices.