Fighting Apple comes with a heavy cost. Research in Motion, the Canadian maker of the popular BlackBerry devices, continues to sign up new subscribers at an impressive clip, even in the face of growing competition from Apple's snazzy iPhone and other devices. But in a first-quarter earnings report on June 25, the company disappointed investors by saying it would sacrifice profits in the short term to improve its competitive position in the future. Its stock plummeted 12 percent on June 26, as the overall stock market slid.
On the surface, RIM's earnings appeared plenty impressive. The company reported revenues of $2.24 billion, up 107 percent from the year-earlier period. And it generated $483 million in net income, or 84 percent a share, compared with net income of $223 million in the same quarter last year, or 39 percent a share. It also said that wireless operators added 2.3 million new BlackBerry subscribers in the quarter, bringing its industry-leading total in the smartphone market to more than 16 million subscribers.
'A Land-grab Game'
But RIM fell short of the financial community's high expectations. Analysts were expecting the company to report $2.27 billion in revenue, and 85 percent a share in net income, according to a poll by Thomson Financial. Profits were light because operating expenses came in higher than expected. RIM is ramping up its investments to capture more market share, with operating costs rising 22 percent, instead of the expected 17 percent.
"The quarter was good but it wasn't better than expected," says Ken Smith, senior portfolio manager of Munder Capital Management, which owned 90,000 shares of RIM as of the end of March. "There was no positive surprise."
On a conference call following the announcement, analysts expressed concern about RIM's growing expenses. The company attributed the rise to an increase in prices of components...

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