Analysts Still Bullish on RIM

Research In Motion didn't wow investors with its Q1 earnings, but industry observers are far from discouraged.
Research In Motion disappointed investors with solid -- but not spectacular -- numbers for its first-quarter earnings yesterday, but analysts are still bullish on the BlackBerry maker.

RIM's (NASDAQ: RIMM) adjusted earnings of $0.98 per share topped Wall Street expectations by four cents, the company reported a 53 percent jump in sales to $3.42 billion, in line with analyst estimates. But RIM's 3.8 million new subscribers came in just below expectations.

Yet the company still posted a number of positive figures, as well. During the quarter, RIM shipped approximately 7.8 million devices, and the total BlackBerry subscriber account base grew to approximately 28.5 million, according to RIM.

"We are starting fiscal 2010 with strong financial performance and impressive market share gains, including a 55 percent share of the U.S. smartphone market according to IDC's latest estimate," Jim Balsillie, RIM's co-CEO, said during the company's earnings call. "The industry-leading BlackBerry product portfolio is driving strong customer demand around the world and our penetration of new market segments continues to expand."

Peter Misek, analyst at Canaccord Adams, came away from the results with a mixed outlook.

"On one hand, device sales were weak, gross margins could again see the low 40s and enterprise net [subscription] adds were soft," Misek wrote today in a report. "On the other hand, operating margins were solid and inventory levels remain very low, which could fuel unit upside when carriers start to replenish stock."

Though he cited some concern, Misek remains optimistic about RIM's future performance in the fiercely competitive smartphone market.

"In the end, we saw nothing that changes our very bullish long-term outlook on RIM, especially with a series of impressive new product launches on the horizon," he wrote. "However, we are becoming increasingly concerned by the broader consumer electronics spending outlook. Our checks continue to suggest that the bounce we saw in early spring has begun to fade and, without the consumer tailwind at RIM's back, we believe it prudent to remain on the sidelines."

RIM's earnings report comes amid ever-increasing competition in the smartphone segment, with the new iPhone 3G S going on sale today and the Palm Pre entering its second week of availability.

When asked during yesterday's earnings call how RIM will fare given the competition -- including Apple's move to cut the price of the previous-generation iPhone 3G to $99 -- Balsillie said RIM and the BlackBerry were ready for a fight, though he refused to mention his rivals by name.

"We've had very aggressive promotions through carriers, BlackBerries for $49 and so on, and I'm not one to follow these other things too closely, but that one $99 model, that's a year-old product, so I don't think that's a big structural thing happening," he said. "The other product [the Palm Pre] is brand new, so it's too early to tell what will happen, but we've always focused on our own value proposition."

"We've demonstrated a huge surge of strength recently and we're not taking our foot off the gas, so extrapolate from that as you wish," he added.

Balsillie also pointed to the fact that a record 80 percent of RIM's new subscriptions came from the consumer side. That's an area the company's business -- which has long centered purely on the enterprise space -- that it's been aiming to expand.

"We've made dramatic progress in penetration of new market segments," he said. "Non-enterprise customers ... now represent more than half of BlackBerry accounts."

Will Stofega, analyst at IDC, said the boost in non-enterprise signals RIM's success in diversifying its customer base.

"I think in terms of revenue, the numbers are up, and really that's what you need to look at first -- they had record results during the last earnings report, and everyone hoped they'd beat those, but that's unrealistic," Stofega told

"There are some issues related to the enterprise -- budgets are being cut, there's seasonal issues with the buying cycle -- but they're picking up the slack on the consumer side," he said. "Overall, they're doing everything they need to be doing."

And though Apple will be grabbing headlines today with sales of the iPhone 3G S, for its part, RIM just unveiled the BlackBerry Tour, which analysts say will help strengthen its position in the market.

Meanwhile, industry watchers expect RIM this summer to release an update to the Storm, its answer to the iPhone's touchscreen interface.

Article courtesy of

Tags: consumer, Blackberry, iPhone, RIM, carriers

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