Despite increasing competition in the smartphone space, Research In Motion (NASDAQ:RIMM) shipped 7.8 million devices in the first quarter and saw its revenue grow by 33%. The BlackBerry maker reported its first-quarter earnings last night, and told investors that even though it expects second-quarter revenues to be lower than Q1, it isn’t afraid of its growing competition.
RIM executives actually had to stifle laughs when asked if they were concerned about a potential BlackBerry killer on its Q1 earnings conference call. In total, the company added 3.8 million net new BlackBerry subscriber accounts in the quarter, bringing its total subscriber base to 28.5 million. The growth puts RIM at a 55% market share in US smartphones.
Even with the impressive growth, RIM probably shouldn’t be so quick to chuckle. Fully 80% of RIM’s new customer additions came from the consumer space, the market BlackBerry was most aggressively pursuing, but also the market best known for Apple’s (NASDAQ:APPL) iPhone, the latest version of which was officially launched today. That is not to mention, it’s also the market expecting 18 more Google (NASDAQ:GOOG) Android devices, the Palm (NASDAQ:PALM) Pre and a host of other options.
RIM is one of the most successful crossover lines in the smartphone industry, but it is in a difficult position. Its options are to attract price-sensitive customers with low-cost, albeit still advanced and expensive to make handsets, or focus on more basic, cheaper handsets that aren’t attracting any buzz in today’s competitive environment. This was the problem RIM already ran into in February when it lowered its financial outlook, but upped its subscriber additions. RIM subscribers were increasing at the time, but they weren’t the high-value, high-spending customers they attracted in the enterprise space. RIM is now forecasting lowered revenues of between $3.45 billion and $3.7 billion for the second quarter.
The consumer market is also being increasingly defined by software and application storefronts. Approximately 81% of RIM’s $3.42 billion in revenue came from devices, 13% from services, 2% from software and 4% from other sources. RIM’s BlackBerry App World has only been commercially available for a few weeks now, but the numbers suggest it’s a company still very much defined by hardware. RIM’s co-CEO Jim Balsillie is confident about the RIM’s upcoming smartphone lineup’s competitive prospects, but – in today’s market – success is not a sure thing.
“The lineup really for the next 14 to 15 months is spectacular,” Balsillie said on the call. “And engagement with the carriers is fantastic. With this consolidation in consumer electronics to the smartphone, and the carrier being a services platform, which is our OEM strategy, we have sector winds at our sail. But, when you are merging a lot of stuff and bringing new stuff, you give your best of kin. I think the range is a little open, because if a lot of things go right, they’ll go really well, but it is the summer time. We are very pleased with where are and where we’re doing.”