Research In Motion said on Thursday it plans to change the way it charges for its BlackBerry services after reporting that its subscriber base shrank for the first time in its history, and its U.S.-traded stock tumbled 10 percent after the bell.
Earlier in the day, the stock had rallied 8 percent to $15.25 in extended-hours trading after the smartphone maker reported a narrower-than-expected quarterly loss and said it had boosted its cash cushion ahead of next month's crucial launch of the BlackBerry 10 smartphone.
But the sentiment turned negative during a conference call with analysts. Chief Executive Thorsten Heins said the company would offer more flexible pricing for its services, once prized for its security features but increasingly challenged by rivals.
Analysts on the call expressed concerns that the change could shrink RIM's profitable services revenue stream, and the U.S.-traded stock fell about 10 percent to $12.74 by 6:20 p.m. New York time.
Investors also started to fret about the shrinking subscriber base. In recent years, RIM has propped up its subscriber numbers with buoyant sales in emerging markets even as subscribers in North America defected.
"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," said Mark McKechnie at Evercore Partners in San Francisco.
One reason the shares rose earlier was RIM managed to build up its cash cushion to $2.9 billion from $2.3 billion in the previous quarter.
That's important because RIM will need the funds to manufacture and effectively promote the BlackBerry 10 in a crowded market. It's counting on the new line to claw back market share lost in recent years to the likes of Apple Inc's iPhone and a slew of devices powered by Google Inc's Android operating system.
"They've done a great job at generating cash," said Raymond James analyst Tavis McCourt in Nashville. "They're certainly in a much better position than they were three or four quarters ago."
The Waterloo, Ontario-based company said it is now testing its BB10 devices with more than 150 carriers - up from about 50 carriers as of the end of October. The formal launch is scheduled for Jan. 30.
"We expect more will follow as we head towards our launch," Heins said.
On an operating basis, the company fared a little better than Wall Street had expected. It reported a loss of $114 million or 22 cents a share, excluding one-time items. Analysts, on average, had forecast a loss of 35 cents a share, according to Thomson Reuters I/B/E/S.
RIM also reported a surprise net profit of $9 million, or 2 cents a share, for its fiscal third quarter ended Dec. 1, reflecting a one-time tax gain from restructuring of its international operations. That compared with a year-ago profit of $265 million, or 51 cents.
The subscriber base fell to about 79 million in the quarter from about 80 million in the period ended Sept. 1. It shipped 6.9 million smartphones in the quarter.
In recent years, RIM's user base has grown, even as the BlackBerry lost ground in North America and Europe, boosted by gains in emerging markets.
While eye opening, the shrinkage was not as bad as some observers expected during the last quarter before the BB10 launch.
"We're encouraged that the subscriber base only declined slightly during a very public transition, and BlackBerry sales were about what we expected," said Morningstar analyst Brian Colello in Chicago.
© 2014 Thomson/Reuters. All rights reserved.