MONTREAL, Que. - Research In Motion Ltd. (TSX:RIM) is looking at making its BlackBerry smartphones in China as it taps into global consumer demand and competes with Apple's iPhone, Nokia, HTC and others.
Co-CEO Jim Balsillie said smartphones will come to dominate the cellphone market, after the BlackBerry maker reported better-than expected third-quarter profits on Thursday.
"I see that going all the way to 100 per cent, the only question is the time to getting there," Balsillie said of smartphone adoption rates.
Balsillie said China represents a large, new market for the BlackBerry.
"To further support our efforts in China, RIM is also exploring opportunities to manufacture and conduct R & D activities in the region."
RIM has deals with IT services provider Digital China and major wireless carrier China Mobile to sell BlackBerrys.
Balsillie said RIM and China Telecom have also signed an agreement to sell BlackBerrys to its customers.
The Waterloo, Ont.-based company, which keeps its books in U.S. dollars, said it earned US$628.4 million or $1.10 per diluted share for the quarter ended Nov. 30. That compared with a profit of $396.3 million or 69 cents per diluted share a year ago.
Revenue in the third quarter totalled $3.92 billion, up from $2.78 billion in the same quarter last year.
The company handily beat analyst estimates for the third quarter, ended Nov. 28. According to Thomson Reuters, the average analyst estimate had been for earnings of $1.04 per share and $3.78 billion in revenue.
Shares in RIM, which closed down 59 cents at C$67.80 on the Toronto Stock Exchange before the results were released, were up more than 10 per cent in after-hours trading.
IDC Canada analyst Kevin Restivo said a Chinese plant lower production costs.
"The move to explore manufacturing opportunities in China is a natural next step for RIM in its bid to become a truly global seller of smartphones," Restivo said. "It's another sign of RIM's ambitions."
Restivo noted that iPhone maker Apple's exclusive contract manufacturer, Foxconn, is in China.
Globally, Finland's Nokia, RIM and Apple were at the top of the smartphone market followed by HTC and Samsung, IDC has reported for the third-quarter ended Sept. 30.
The BlackBerry smartphone is best known for delivering email securely, appealing to business users, but RIM is making gains in the consumer market.
Balsillie said RIM is trying to increase sales by offering prepaid BlackBerrys in different markets and devices with a variety of capabilities or some just with instant messaging and texting to reach a wider clientele.
Smartphones allow their users to surf the Internet, stream video and run stock trading platforms as well as other applications like maps and games.
Analyst Nick Agostino said it will only be a matter of time before RIM is manufacturing in China to add to its other global plants.
"They certainly won't operate their own plant but would outsource as has been their approach over last few years," said Agostino of Toronto-based Research Capital.
RIM also said it added about 4.4 million net new BlackBerry subscribers in the quarter to bring its total user base to approximately 36 million.
Balsillie said the company shipped more than 10 million BlackBerry smartphones during the third quarter.
"RIM is experiencing a great start to the holiday buying season and the strong Q3 results and Q4 outlook clearly reflect the strength of our diversified product portfolio."
In its guidance for the its fourth quarter, the company said it expected revenue between $4.2 billion and $4.4 billion and earnings between $1.23 and $1.31 per diluted share.
Net subscriber account additions in the fourth quarter ended Feb. 27 are expected to be in the range of 4.4 million to 4.7 million.
Earlier Thursday, RIM announced it had fixed the technical problem that was causing some of its BlackBerry smartphone customers in North America to experience delays receiving email.