Research in Motion CFO Discusses Subscriber Additions and Summer Challenges (RIMM)

Jul. 3.06 | About: BlackBerry Ltd. (BBRY)

On Research in Motion's (RIMM) Fiscal Q1 conference call, Research in Motion CFO Dennis Kavelman commented on the company's closely watched subscriber additions and challenges the company faces with summer subscriptions:

Dennis Kavelman - Chief Financial Officer:

We are pleased with our results for the first quarter, as subscriber additions were in line with our forecast and revenue and earnings were slightly higher than our April forecast. Revenue for the first quarter ended June 3rd with $613 million, our highest quarter ever, which is up 9% from the prior quarter and is slightly above the top-end of the range we guided in April.

RIM added approximately 680,000 BlackBerry subscriber accounts during the quarter, which was in line with our April forecast. The total base of BlackBerry subscriber accounts at the end of the quarter was approximately 5.5 million. Approximately 26% of our total subscriber account base was outside of North America, up from the previous quarter.

I would like to note that we round the total base number to the nearest hundred-thousand. We did have some subscriber account base adjustments during the quarter due to reconciliations of a few North American to European carriers, but the total was in the several tens-of-thousands, not nearly the scale of the adjustments we had last year. We continue to work with the carriers to improve their systems and expect these adjustments to continue to decrease in size and frequency...

As we have discussed every year, and talked about on the last conference call as well as at the capital markets day in May, the August quarter is typically affected by summer seasonality in both North America and in Europe. Europe is typically affected to a greater extent than North America. This weakness is most evident in subscriber account additions and in service and software revenue. Simply put, our corporate customers take holidays in July and August. They all take their BlackBerrys with them on vacation, but they are not activating as many new users until they come back in September.

This being said, we work hard with our carrier partners to execute channel programs to encourage people to continue buying during this period and keep positive momentum. We’re forecasting second quarter revenue to be higher than Q1 in the range of $620 million to $650 million. Handset shipments are expected to remain strong, with our new products now broadly available and continuing healthy upgrades, and we are encouraged by a stronger order book than we would normally have, relative to our forecast this early in the quarter.

In Q2, we expect software revenue to be steady with Q1, and for normal growth in service revenue.