Speculation that BellSouth Wireless Data Ltd. would not immediately renew its supply contract with Research In Motion Ltd. has proven accurate, expected to result in lower third-quarter earnings for RIM. But the drop is expected to be short-term as more customers sign on to distribute RIM’s interactive pager.
“We do not expect material revenues from BellSouth during (the third quarter),” said Mark Guibert, RIM marketing manager, during the company’s second-quarter earnings conference call. “We fulfilled our order during (the second quarter), which was expected. There are no planned shipments of any material nature.”
While the initial supply contract between BSWD and RIM ended in August, the two continue negotiations to renew the deal, and RIM said it may renew significant shipments to BellSouth in the fourth quarter.
The revelation means RIM’s third-quarter revenue figures are expected to drop significantly with the conspicuous absence of its largest customer. RIM is coming off a second quarter marked by revenues of $28.7 million, triple that of the same period last year. Inter@ctive Pager sales contributed close to 70 percent of revenues, and BellSouth has been the largest buyer of those devices to date.
Wall Street’s initial reaction to the news was negative. RIM stock fell from $28.75 to $26.50 following the announcement Sept. 24. But analysts largely dismissed the brief drop as merely opportunistic and indicative of a nervous investor climate. Calmer heads seemed to have prevailed, as the stock jumped to $30.87 the following Monday. RIM stock was trading at $31.12 at press time.
Behind this renewed investor confidence in the face of declining short-term shipping and revenue is the expectation that several other new Inter@ctive Pager customers are coming on board.
Most significant of these new customers are American Mobile Satellite Corp. and Paging Network Inc. AMSC is expected to launch its eLink messaging service nationally within weeks, using the 850 version of the Inter@ctive Pager, which recently received Federal Communications Commission approval.
PageNet is selling both the Blackberry device from RIM, as well as reselling the BSWD service as part of a marketing and distribution agreement with BSWD.
Both companies are expected to attract substantially more users than BSWD could by itself.
From the beginning, RIM has said it never intended for BSWD to be its only means of distribution, a claim backed by the increasing number of alternative partners the company has added.
Most recently, RIM signed an agreement with Internet service provider espernet.com to supply its BlackBerry Internet Edition pager to some 270,000 espernet.com subscribers. The initial order is expected to generate more than $6 million in device and service revenues. The Internet edition of BlackBerry is designed to allow ISPs to extend e-mail solutions wirelessly with single mailbox integration.
Its first ISP customer was RCN Corp., which offers the BlackBerry Internet Edition to its 500,000 customers. Other agreements include those with w-Trade Technologies, using the Inter@ctive Pager for its w-Bank wireless banking system; GoAmerica Communications Corp., which now offers POP3 e-mail access support through the GoAmerica Go.Web browser, using the Inter@ctive Pager 950 and the BlackBerry; and ReachNet, which uses the Inter@ctive Pager 950 for its Wireless TTY service for the deaf and hard-of-hearing individuals.
Hoping to build on this momentum, RIM filed a registration statement with the U.S. Securities and Exchange Commission and a preliminary prospectus with securities commissions in Canada for a proposed public offering of 5 million common shares. Lead manager for the offering is Merrill Lynch & Co. Co-managers are SoundView Technology Group Inc. and others.
The company said it plans to use proceeds from the offer to fund research, sales and marketing activities and even acquisition or investments in other businesses.
