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... Unless You're In Handhelds

Research In Motion Ltd. reported last week that sales were up 68% in its first quarter, but rising competition and an ongoing legal dispute still loom on the horizon for the BlackBerry device maker.

RIM's revenue for the quarter, ended May 28, was $453.9 million, up from $269.6 million in the same period last year. Nearly 70% of its revenue came from handheld sales, 17% from service, and 11% from software. Net income for the quarter was $132.5 million, compared with $55 million in the year-ago quarter.

The number of BlackBerry subscribers in the quarter was up 592,000, a 24% increase from the previous quarter, bringing total subscribers to 3.1 million. That didn't meet the expectations of analysts, who were looking for more than 600,000 new subscribers.

Ongoing legal challenges from patent-holding company NTP Inc. contributed to lower-than-expected subscriber growth, says Brad Akyuz, an analyst at research firm Current Analysis. RIM had agreed to pay NTP $450 million in royalties to settle the dispute, but RIM recently returned to court, saying NTP refused to carry out the agreement.

RIM also faces increased pressure from competitors in the PDA and push-E-mail markets. It holds the lead in PDAs, with 21% of the market, according to a May Gartner study. PalmOne Inc., which held the lead a year ago, remains on RIM's heels with an 18% share, Gartner says.

PalmOne last week said its Treo smart phones led the way to $336 million in revenue for its fourth quarter, ended June 3, a 26% increase from the year-ago quarter. Net income rose to $17.7 million, compared with $13.3 million a year ago. Analyst Akyuz says, "Making the Treo 650 smart phone available in U.S. has really helped PalmOne grow substantially."

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