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RIM admits user base decrease as shares drops

sc001Following a report that the number of its subscribers had decreased, Research in Motion announced on Thursday that it will be amending its charges plan for its BlackBerry services, which also caused its stock in the U.S. to dive 10 percent.

Prior to the announcement, RIM’s stock rose 8 percent to $15.25 that stretches beyond the regular trading hours after RIM revealed lesser quarterly loss than previously expected. The company also said that it has raised enough money for the upcoming release of its new BlackBerry 10 smartphone next year.

However, things turned to sour during Chief Executive Thorsten Heins’ conference call with analysts. In the conference, he announced that RIM is thinking of offering more flexible pricing of its BlackBerry services, once vaunted for providing robust security features but has come under attack by competitors.

The conference call also saw the growing concerns of analysts about the potential negative effects of such changes, which could mean a decrease of RIM’s profitable services revenue stream. RIM’s U.S.-traded stock fell about 10 percent to $12.74 by 6.20 in the afternoon Eastern Standard Time.

Investors have also started to show concerns about the decreasing subscriber base. Although RIM had seen the numbers of its customers shrink in North America in recent years, it was able to successfully market its products and services in emerging markets.

“The early reaction was probably just ‘Hey, numbers looked OK, better loss, the cash flow was good’ but if you know the company, you’re looking at the subscriber base falling off,” a San Francisco-based analysts from Evercore Partners Mark McKechnie said.

One of the reasons for the increase in RIM’s shares earlier was because it was able to secure more cash–$$2.9 billion– from a $2.3 billion mark during the previous quarter.

Analysts saw the need for RIM to raise more cash for manufacturing its new BlackBerry 10 smartphone and promote it in a very competitive market. RIM hopes to regain the market shares it has lost to rivals like the popular Apple Inc’s iPhone and other devices running versions of Google Inc’s Android software.

“They’ve done a great job at generating cash,”  analyst Tavis McCourt from Raymond James  in Nashville said. “They’re certainly in a much better position than they were three or four quarters ago.”

RIM also announced that it is now doing tests of its BlackBerry 10 devices with more than 150 carriers–an increase in figure of about 50 last October. BB10 devices will be released on January 30.

Heins assured everyone during the conference call that more things can be expected leading to the launch.

RIM posted a lower-than-expected $114 million or 22 cents per share operating loss this quarter. Wall Street expected that the company would be losing 35  cents per share previously.

Additionally, RIM disclosed  a surprising net profit of $9 million net profit for the third fiscal quarter that ended on December 1,  a positive note on the restructuring done on the company’s international operations. During the same period last year, the company posted a net profit of $265 million.

RIM’s subscriber base fell to 79 million during the quarter from an 80 million mark during the period that ended in September 1. the company’s user base has seen growth for the past few years even if it was losing ground in the United States and Canada as it reached out to markets from emerging economies.

“We’re encouraged that the subscriber base only declined slightly during a very public transition, and BlackBerry sales were about what we expected,” Morningstar analyst Brian Colello said.

source: reuters

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