Research in Motion (RIMM)
Research in Motion (RIMM: Charts, News, Offers), the leading manufacturer of wireless smart phones and related technology reported earnings of $710.1 million in fiscal 10Q4, an increase over the corresponding quarter in 2009. A great earnings report, except analyst consensus had projected a profit of $1.28 per share. The RIM fell short of this estimate by a single penny. As a result, Research in Motion shares fell over five percent in afterhours trading yesterday.
Daily Chart
If you are not able to see the chart, your email client probably does not support javascript. To view it, please
click here
Stock Analysis
Research in Motion’s most recognizable product is the popular Blackberry. RIM was one of the first companies to experiment with wireless “push email” in the 1990′s and for several years, they were the only company offering such a service. As the market evolved toward the smartphone, RIM maintained leadership in the field. RIM had a very profitable year in FY09-10, but there are many questions about the Blackberry ability to compete in the smartphone market on into the future.
In the last quarter, RIM shipped 10.5 million smartphones and added 4.9 million new subscribers, missing on the Wall Street unit projection of 11.2 million units and exceeding subscriber projection of 4.7 million subscribers. However, quite possibly the reason for the one cent shortfall in earnings per share, was that many of the new sales involved lower priced smartphones such as the Blackberry Curve.
While RIM has been profitable for many years and certainly profitable last year, it is easy to see where the company might be headed for a little trouble as the smartphone market moves from corporate tool to consumer luxury. Blackberry does email quite well, but Blackberry competitors provide adequate email services along with thousands of other applications. While Blackberry has certainly expanded its number of applications or “apps”, iPhone and recently Android, the operating system for Google, are the clear leaders in the field. Blackberry is also trying to keep up in the area of hardware, especially the Bold, Tour and Storm model families; however these offerings blend into the rest of the pack when placed into competition with the Apple (
AAPL:
Charts,
News,
Offers) iPhone and the various Google (
GOOG:
Charts,
News,
Offers) powered phones such as the Verizon (
VZ:
Charts,
News,
Offers) Droid and the Sprint (
S:
Charts,
News,
Offers) Hero, among others.
For the Canada-based company, international (non-North America) sales accounted for 48% of total revenue for the period and there is reason to believe that international sales will continue to provide the lion’s share of profit for RIM going forward. RIM has agreements with China Mobile and Russian mobile companies, MTS and VimpelCom.
However, the biggest question for Blackberry is regarding the coming technology split. 3G wireless networks are all the rage and are necessary for quality smartphone usage – yet the so-called 3G network has yet to be completed in this country, much less the rest of the world. However, at least one big player in the industry is already constructing the next generation or 4G network. 4G offers speeds up to five times faster than 3G. Blackberry phones currently work with all of the major wireless carriers, but 4G will force a decision at RIM about which wireless technology to use in its phones. 4G networks will be constructed with either the W-CDMA or WiMax technologies, which are incompatible with each other. Last year, Sprint jumped out ahead, investing $3 billion in the WiMax network, but while the other companies are transitioning to 4G a bit more slowly than Sprint, they all support W-CDMA.
Key questions for RIM are which 4G network to support and whether they want to continue to place all bets on their most successful product: Blackberry.
More news about Research in Motion
Other Stocks in the News
VN:F [1.9.17_1161]
Rating: 0.0/5 (0 votes cast)
Other relevant articles you may like
Joshua Caucutt is long-time market follower and finance writer. Debt management, entrepreneurship and government economic policy are areas of emphasis. He regularly contributes to the
Stock of the Day analysis.
I am not sure what you mean about RIM having to make decisions on what phone networks to support. They will merely continue to do what they have done, which is issue phones to 550 mobile carriers in the world that offers GSM (most common) or CDMA. RIM can build any kind of phone, anywhere, whether 4G or Wimax, as it makes no difference. RIM even built phones to comply with the China 3G network, that is home grown and built up by Chinese engineers.
The fact that Sprint went to HTC to ask them to provide a 4G phone does not mean that HTC is the only 4G phone builder.
RIM can make a phone that will support 3G and 4G for the some mobile carrier. It is more a matter to each individual mobile carrier to ramp up to the next generation. Then RIM starts selling them those phones.
Meanwhile, despite the pundits and minority analysts, RIMM is making money hand over fists. The cash register is ringing big time around the world.
RIM should be applauded for a few years ago putting a lot of time, expertise and resources to get their phones out to the world, much faster and to a greater extent than Apple and Google, that is for sure.
If you want to make a lot of money, bet on RIM to reach over $100 a share again, like it did before the great recession.
Joe, I am not as familiar with all of the technology as you may be. My research simply indicated, in more than on source, that WiMAX might pose some kind of problem for Blackberry.
That said, RIM is certainly making money – overseas – and probably will for a while yet. However, in my humble opinion, they need to up their game in order to compete with the many smart phones now entering the market. In other words, status quo operations and Blackberry will be overtaken by iPhone and the various Google/Droid phones. If RIM can somehow offer a unique product that is viewed as equal or better than the current top products, then the company has a secure future.
Two issues give me pause: most of their profit is from overseas . . . what will happen when the other smarphones hit those markets? and two, RIM posted a profit in the last quarter, but much of that profit was due to lower-end, lower-profit smarphones. It is possible that many of those entry-level smartphone customers can’t wait to get a chance to buy a Droid or iPhone . . . maybe not.
Joshua: Thanks for the reply. I sent you back a long email on more important information about Rimm now and into its future. It is really all good, and certainly not gloom and doom.
Please read my email on facts and specifics about Rimm selling well both in North America and with sales really ramping up nicely in overseas markets.
Yeah, they are going to sell a lot less costly phones for the masses that can afford those only. We got to think about others in this world, with less money to buy and pay for Applications even. BB will cater to them.
The best proof about BB being a powerhouse, is how Nokia fell from their competition, along with Palm and Microsoft. Nobody talks about why those competitors fell on harder times—due to Blackberry, and of course, Apple.
With Google leaving Red China, that puts a big cloud on Android OS phones, and Android Applications for China. BB could pick up a lot of sales with Google pulling out and the Android falling to the way side due to govt pressure to favor BB and others. Time will tell, but nobody even knows how that will play out.
After seeing my email, let me know more on what you think.
Thanks, Joe