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Press Release

June 30, 1998

RIM Reports Increase In First Quarter Fiscal 1999 Results

Waterloo, ON - Continued strong demand for RIM's Inter@ctive™ Pagers, coupled with robust orders from OEM radio customers and higher shipments of Wireless PC cards, led to a sharp increase in first quarter fiscal 1999 revenue for Research In Motion (TSE: RIM), the company reported today.

Revenue for the quarter ended May 31, 1998 more than quadrupled to $9.8 million from the $2.1 million reported for the same period last year. Revenue was diverse by both product and geographic region. Approximately 52% of sales were derived from sales of RIM's Inter@ctive Pager, 29% from OEM radio customers, and 19% from Wireless PC Cards. Included in revenue was $0.9 million derived from government funding which was applied in RIM's ongoing product research and development activities. Approximately 65% of product sales were in the U.S. and 35% were in Asia.

Net income for the quarter improved substantially over the corresponding period of the 1998 fiscal year - $0.8 million, versus a loss of $2.1 million at the same time last year. Earnings per share were one cent on both a basic and fully diluted basis, compared to a loss of $0.04 per share in the first quarter of fiscal 1998. Reflecting the Company's normal product development cycle, net income in the first quarter was lower, as expected, than the fourth quarter of fiscal 1998.

The Company also reported that a major new product release is expected to be available in the U.S. and Canada this fall, approximately 90 days later than originally anticipated - due to regulatory and technical requirements that are now being addressed successfully. This new product has passed all regulatory product tests and has already received regulatory approval in Canada. RIM expects to receive regulatory approval in the U.S. shortly.

The Company noted the timing of this product release will result in some shifting of revenues, which were expected to be recorded in the Company's second quarter, forward to the latter half of the fiscal year.

"We started the year with very strong momentum, which has translated into rapid revenue growth and strong order intake to date," said RIM Chairman and Co-CEO Jim Balsillie. "Despite the minor delay in our new product release, we expect second quarter revenue will reflect a sizable increase over the second quarter of last year, underscoring the favourable momentum we've achieved in revenue growth to date. We believe revenue will continue to ramp up very quickly in the second half of the year. In fact, at this point, we anticipate RIM will achieve the most rapid revenue growth in its history over the second half of the 1999 fiscal year."

Balsillie said RIM will begin making early shipments of the new product in the second quarter in advance of the full scale launch expected in the fall.

Among other financial and operating highlights of the year-to-date and first quarter:

• Three new OEM radio modem contracts have been signed since the beginning of the new fiscal year, representing $7 million in revenue for delivery over the next 12 months.
• Gross profit in the first quarter was $4.7 million, or 48% of revenue. This compares favorably with $0.9 million, representing 42% of revenue, in the first quarter of fiscal 1998.
• Selling, marketing and administrative expenses increased 78% to $1.8 million year-over-year and roughly doubled over the previous quarter owing to new product introduction costs. These expenses are expected to decline on a percentage basis as revenue ramps up in the second half of fiscal 1999.
• Research and development investments of $2.6 million were up 13% over the previous quarter and climbed 60% from the first quarter of fiscal 1998. At the current level of 26% of sales, R&D spending temporarily exceeds management's long-term target of 10% to 15% of revenue but is expected to come into line as a result of the Company's revenue expectations for the third and fourth quarters.

"Our first quarter exceeded our expectations both in terms of pure financial performance and also in terms of business, customer and product development," said President and Co-CEO Mike Lazaridis. "Because of our recent new order momentum and the pending launch of new products, we expect to see a noticeable ramp up in performance in the second half. Overall, we are very bullish about our future."

Research in Motion is a world leader in designing, manufacturing and marketing wireless consumer and business-to-business electronic access technology for the rapidly emerging mobile personal communications market. The company's current product portfolio includes revolutionary two-way pagers, wireless personal computer card adapters and embedded OEM wireless radios. Based in Waterloo, Ontario and listed on The Toronto Stock Exchange, Research in Motion is a knowledge-based company with proven, leading technologies. Its customers include a diverse range of major multinational companies including wireless network suppliers, original equipment manufacturers and value-added resellers.

 

Statement of Operations

For the three months ended May 31	Fiscal 1999	Fiscal 1998
(unaudited)		(note 1)
Revenue	$ 9,776,116	$ 2,089,528
Cost of sales	5,082,179	1,208,654
	4,693,937	880,874
Research and development	2,565,380	1,602,833
Selling, marketing and administration	1,838,681	1,034,963
Amortization	753,425	396,669
Interest Expense	1,081	18,188
	5,158,566	3,052,652
Loss from operations	(464,529)	(2,171,778)
Investment Income	1,491,711	51,448
Income (loss) before provision for taxes	1,027,082	(2,120,330)
Provision for income taxes	270,000	-
Net income (loss)	$757,082	$(2,120,330)
Earnings (loss) per share, basic	$.01	($.04)
Earnings (loss) per share, fully diluted	$.01	($.04)

Note 1: Comparative figures have been reclassified to conform to the current year's presentation.

BALANCE SHEET

As at May 31	Fiscal 1999	Fiscal 1998
(unaudited)		(note 1)
CURRENT ASSETS
Cash and short-term investments	$109,754,720	$8,521,453
Accounts receivable	10,463,482	6,605,083
Inventory	15,531,322	16,388,727
Prepaid expenses	1,582,923	499,617
	137,332,447	32,014,880
CAPITAL ASSETS	16,968,052	8,214,738
TOTAL ASSETS	$154,300,499	$40,229,618
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$ 2,477,452	$ 1,598,926
Deferred revenue	1,012,504	-
	3,489,956	1,598,926
SHAREHOLDERS' EQUITY
Common shares	148,231,960	39,079,754
Retained earnings	2,578,583	(449,062)
	150,810,543	38,630,692
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$154,300,499	$40,229,618

Note 1: Comparative figures have been reclassified to conform to the current year's presentation.

STATEMENT OF CHANGES IN FINANCIAL POSITION

For the 3 months ended May 31, 1998	Fiscal 1999	Fiscal 1998
(unaudited)		(note 1)
CASH PROVIDED BY (USED IN) OPERATIONS
Net income (loss) for the period	$ 757,082	$ (2,120,330)
Items not requiring an outlay of cash:
Amortization	753,425	396,669
	1,510,507	(1,723,661)
Net changes in non-cash working capital items	3,214,194	2,984,587
Total cash provided by operations	4,724,701	1,260,926
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Repayment of loans payable	-	(1,480,364)
Issuance of share capital, net of share issue costs	(688)	(15,463)
Government funding received for capital expenditures	250,000	-
Total cash provided (used by) financing activities	249,312	(1,495,827)
CASH USED IN INVESTING ACTIVITIES
Acquisition of capital assets	(4,238,547)	(719,323)
Total cash used in investing activities	(4,238,547)	(719,323)
Increase (decrease) in cash and short term investments for the period	735,466	(954,224)
Cash and short-term investments, beginning of the period	109,019,254	9,475,677
Cash and short-term investments, end of the period	$109,754,720	$8,521,453

Note 1: Comparative figures have been reclassified to conform to the current year's presentation.