Consumers Drive Bulk of BlackBerry Growth

By SARA SILVER Consumer demand for high-end cellphones boosted the fortunes of BlackBerry maker Research In Motion Ltd., helping offset a slump in business spending and increasing competition. The handset maker posted a 33% jump in quarterly profit as it added 3.8 million new BlackBerry subscribers. But the company's revenue and customer growth was slightly below levels reached during the holiday quarter. RIM Co-Chief Executive Jim Balsillie said 80% of subscriber additions in the latest quarter came from consumers and small businesses, rather than corporate users. That's up from 60% a year ago. RIM has introduced a slew of new devices, from flip-phones to touchscreens, and lowered prices on older models to lure consumers. The company posted sales of $3.42 billion for its fiscal first quarter, which ended May 30, up 53% from the year-ago period but down from $3.46 billion in the fourth quarter. Profit rose to $643 million, or $1.12 a share, compared with $483 million, or 84 cents a share, a year ago. Some analysts downplayed the significance of RIM's sequentially flat shipments and sales. "A seasonal downtick of 1% in revenue following the Christmas holiday seems like a small thing to me," said Michael Urlocker, telecom analyst at GMP Securities. RIM is fending off increasing competition from Apple Inc., which this month unveiled a new iPhone, and cut prices on older models to as little as $99. Also this month, Palm Inc. released its Pre smart phone, which has a touch screen and a slide-out keyboard. On a conference call Thursday, Mr. Balsillie said the company isn't worried about the competition. "We don't really, sort of, fret those kinds of things," he said. The smart-phone market continues to expand, despite a contraction in the global cellphone market. One reason is new software applications like social-networking and sales-force tools that make the devices more versatile for consumers and businesses. These applications are helping to offset the declines from companies laying off employees or shutting down. More broadly, despite the recession, the spread of messaging as a means of communication is driving ordinary consumers to seek out BlackBerry devices, once seen as the workhorse of Wall Street analysts and executive jet-setters. "I need a BlackBerry," says De-Adedra Anderson, who uses a desktop computer and cellphone to coordinate education for 170 students at a Harlem elementary school. "There are so many times I get emails or text messages... and I won't see it." While developed nations have been the primary buyers of smart phones, the devices are increasingly being used in developing nations as substitutes for home computers and Internet connections. One hot market for BlackBerry is Indonesia, where carriers now offer the device on a prepaid basis for consumers who don't want contracts. As RIM has become one of the biggest handset vendors it "is experiencing the same seasonality hitting the overall cellphone market," said Bonny Joy, wireless analyst at Strategy Analytics. —Stuart Weinberg contributed to this article.