U.S. Economy Key to BlackBerry Sales

TORONTO (Reuters)- The slowdown in the U.S. economy and its impact on BlackBerry saleswill be among the top things to watch for when Research In Motion(RIM.TO: Quote, Profile, Research) (RIMM.O: Quote, Profile, Research) reports quarterly results on Wednesday.

Aside from the usual focus on profits and subscriber additions –and the Canadian company’s outlook for both — analysts want to knowwhether upheaval in the financial services industry is hurting sales ofthe company’s wireless e-mail devices.

"It’s a worry on the enterprise side as that is still half theiractivations and a larger part of their replacement sales," saidDeutsche Bank analyst Brian Modoff.

The term "enterprise" refers to RIM’s large number of corporate andgovernment clients, who have been the engine of the company’s growth.

The BlackBerry is a staple tool of executives, politicians and otherprofessionals. It is also gaining wider acceptance in the retail marketand among small-business owners.

More than a third of RIM’s 12 million subscribers are classified asnon-corporate and non-government, which mostly means retail users orthose who are self-employed.

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

Research Capital analyst Nick Agostino wonders whether those losingcompany jobs and the BlackBerrys that go with them would necessarilyend up getting a BlackBerry on their own.

"If that is the case, then I think that gives some support to atleast the consumer side of the business growing and would give supportto the low churn in the overall business," he said.


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

He thinks it’s unlikely that retail customers would give up theirBlackBerrys, which are being loaded up with the multimedia applicationsto help them compete against rivals such as Apple Inc (AAPL.O: Quote, Profile, Research), Nokia (NOK.N: Quote, Profile, Research) and Motorola (MOT.N: Quote, Profile, Research).

In late February, RIM raised its subscriber forecast for the fourthquarter ended March 1, saying it expects additions will be 15 percentto 20 percent higher than the 1.82 million it predicted in December andthat its total subscriber base should hit about 14 million.

It forecast revenue of $1.8 billion to $1.87 billion and earnings per share of between 66 and 70 cents.

Analysts expect RIM will earn 70 cents per share before one-time items, on revenue of $1.85 billion.

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

RIM has "a habit of hitting their guidance smack in-line, and thenguiding the following quarter well above consensus," Modoff said. "Wewill see if this holds true this time."

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

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

RIM also had to manage a "critical severity outage" in earlyFebruary that cut off wireless e-mail for users across the Americas forabout three hours.

The problem rattled some observers because it was reminiscent of asimilar outage last April. Still, RIM shares stumbled only a littlelower before regaining strength later in the month.

(Reporting by Wojtek Dabrowski; editing by Robert Melnbardis)