BlackBerry stock plunges 10 per cent

By Rob Gillies

Smartphone maker's share price drops after company says it will change the way it splits revenue with carriers

BlackBerry-maker Research In Motion, which is already struggling with plunging sales, yesterday said it lost subscribers for the first time in the latest quarter, as the global number of BlackBerry users dipped to 79 million and the stock plunged in after-hours trading after the company said it will change the way it shares revenue with carriers.

The Canadian company did add to its cash position as it prepares to launch new smartphones on January 30 that are deemed critical to the company's survival.

RIM's stock initially jumped more than 8 per cent in after-hours trading on that news, but then fell US$1.48, or 10.4 per cent, to US$12.65 after RIM said it won't generate as much revenue from telecommunications carriers once it releases the new BlackBerry 10 platform.

RIM is changing the way it charges service fees, putting an important source of revenue at risk.

RIM chief executive Thorsten Heins said only subscribers who want enhanced security will pay fees under the new system.

"Other subscribers who do not utilise such services are expected to generate less or no service revenue," Heins said.

RIM's stock had been on a three-month rally that has seen the stock more than double from its lowest level since 2003.

But Mike Walkley, an analyst with Canaccord Genuity, said BlackBerry 10 will change RIM's services revenue model dramatically.

Instead of getting about US$6 a device each month from carriers and users RIM could get as little as zero.

"That's what turned the stock from being up 10 per cent to being down 10 per cent," Walkley said.

"That's been part of our worry. How do they come back with a new platform and get carriers to continue to share the higher revenue which sounds like they are not going to and then subsidise the phone to make it affordable for consumers and enterprises," he said. "People are seeing that the services revenue has a lot of risk to it now with the BlackBerry 10 migration."

Three months ago, RIM had 80 million subscribers. Analysts said the loss of one million subscribers was expected.

Once coveted symbols of an always-connected lifestyle, BlackBerry phones have lost their lustre to Apple's iPhone and phones that run on Google's Android software.

RIM is banking its future on its much-delayed BlackBerry 10 platform, which is meant to offer the multimedia, internet browsing and apps experience that customers now demand.

"We believe the company has stabilised and will turn the corner in the next year," Heins said.

He noted that the company's cash holdings grew by US$600 million in the quarter to US$2.9 billion, even after all its restructuring costs.

RIM previously announced 5000 layoffs this year.

Heins said subscribers in North America showed the largest decline, but said there was growth overseas.

Jefferies analyst Peter Misek called the results better than expected, noting that RIM added a significant amount of cash.

RIM will need the money to advertise the new BlackBerrys and operating system.

Misek also called it a positive development that RIM said there would not be another delay to BlackBerry 10.

"The success or failure of this company will be on BlackBerry 10," Misek said.

RIM posted net income of US$14 million, or US3c a share for its fiscal third quarter, which ended on December 1. That compares with a profit of US$265 million, or US51c a share, in the same quarter a year ago.

The latest figure includes a favourable tax settlement.

Excluding that adjustment, RIM lost US22c a share. RIM reported revenue of US$2.7 billion, down 47 per cent from a year ago.

- AP

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