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RIM earnings are up but disappoint analysts

The company says it is making headway among new demographics

Research In Motion is still on top in North America and growing around the world, but its quarterly results disappointed analysts who worry about the tough competition the company faces.

RIM's revenue for the quarter ended Feb. 27 was US$4.08 billion, up 18 percent over the same period last year. That disappointed analysts, who were expecting $4.31 billion in revenue, according to those polled by Thomson Reuters.

Net income for the quarter was $710.1 million, up from $518.3 million in the same quarter last year.

RIM shipped 10.5 million phones in the quarter, for a total of 37 million during its full fiscal year. That made the BlackBerry the number-one selling smartphone in the U.S. at the end of calendar 2009, RIM said. Total BlackBerry subscribers reached 41 million at the end of the quarter, up from 36 million at the end of the previous quarter, the company said.

RIM has continued to grow even while facing tough competition from Apple and new smartphone entrants. Still, analysts worry about its ability to stay ahead, partly because RIM has traditionally targeted business users almost exclusively, and some of the new growth in smartphones is coming from consumers.

RIM has worked hard at marketing its devices to consumers and has had some success, it said. BlackBerry products are expanding their appeal to new demographics, particularly the tech-centric youth segment, said Jim Balsillie, co-CEO for RIM, speaking during a conference call to discuss the earnings. They are drawn to the ease of typing on the keyboard, the viral nature of BlackBerry messaging and attractive new pricing options, especially as operators offer prepaid options for BlackBerrys, he said.

The company has also had success attracting first-time smartphone users, a strategically important segment because it offers BlackBerry the opportunity to build loyalty in those customers for the rest of their lives, he said.

In addition to the new demographic segments, RIM's growth is coming from markets outside the U.S. For the quarter just ended, 38 percent of subscribers were from international markets, up from 35 percent in the same quarter last year.

RIM expects slightly better results for the current quarter, which ends May 29, and has high hopes for quarters beyond. "We have a number of exciting new hardware and software products for fiscal 2011," Balsillie said. He expects that those products will drive strong shipment growth in the second half.

For the quarter ending May 29, RIM expects to report revenue of $4.25 billion to $4.45 billion, and to add 4.9 million to 5.2 million new subscribers.

RIM's shares were trading at $71.01 on the after-hours markets Wednesday, down from $73.97 at the end of the regular session.