U.S. economy key to Blackberry sales

The slowdown in the U.S. economy and its impact on BlackBerry sales will be among the top things to watch for when Research In Motion reports quarterly results this week.

Aside from the usual focus on profits and subscriber additions, analysts want to know whether upheaval in the financial services industry is hurting sales of the company’s wireless e-mail devices.

“It’s a worry on the enterprise side as that is still half their activations and a larger part of their replacement sales,” said Deutsche Bank analyst Brian Modoff.

More than a third of RIM’s 12 mln subscribers are classified as non-corporate and non-government, which mostly means retail users or those who are self-employed.

Some observers have expressed concern that as companies like investment banks and asset managers cut jobs to cope with the downturn, BlackBerry sales will take a hit. Some firms could delay replacing older versions of RIM’s ubiquitous smartphone with newer models.

RIM co-Chief Executive Jim Balsillie told Reuters in late January he expects only a limited negative effect from a slowing U.S. economy.

He thinks it’s unlikely that retail customers would give up their BlackBerrys, which are being loaded up with the multimedia applications to help them compete against rivals such as Apple, Nokia and Motorola.

In late February, RIM raised its subscriber forecast for the fourth quarter ended March 1, saying it expects additions will be 15-20% higher than the 1.82 mln it predicted in December and that its total subscriber base should hit about 14 mln.

It forecast revenue of $1.8-1.87 bln and earnings per share of 66-70 cents.

Yet with signs the United States is slipping into recession, consumer confidence is eroding and Wall Street faces more pain from the credit crisis, corporate outlooks are facing tighter scrutiny.

RIM has “a habit of hitting their guidance smack in-line, and then guiding the following quarter well above consensus,” Modoff said. “We will see if this holds true this time.”

Despite RIM’s rosy subscriber outlook, investors haven’t been as enamoured with RIM’s shares this year as in 2007, when the stock roughly tripled.

RIM, which began this year at about $115 on Nasdaq, essentially hasn’t seen any progress three months later. On Friday morning, the stock was up $3.45, or 3.1%, at $115.60 on Nasdaq. In Toronto, it was ahead $3.15, or 2.8%, at $117.67.

RIM also had to manage a “critical severity outage” in early February that cut off wireless e-mail for users across the Americas for about three hours.

The problem rattled some observers because it was reminiscent of a similar outage last April. Still, RIM shares stumbled only a little lower before regaining strength later in the month. (Reuters)