RIM Turns Pearl into Gold

by StockJockey

Wednesday, April 02, 2008 - 7:08 pm

Research in Motion's quarter should leave everyone happy, with the exception of Apple, Inc fanboys and Henry Blodget. Blodget's stance is proving to be a loser, and the Apple faithful might want to sober up and realize what they are up against.

It is time for Apple to Man Up if they want a piece of RIM. This fight has been brewing for a while; as CEO Jim Balsillie said a year ago:

“Apple has done us an enormous favour by saying you should expect music on your cellphone,” he said. “[But] I think it’s 10 if not 100 times harder to do the communications aspect onto an MP3 player than to do the mass media player onto a communications framework. I think we’ll absolutely nail it before some new entrant comes even close. You know, everyone’s brave in the locker room. Let’s get it done.” Game On

Balsillie has dunked the ball in the company's four earnings releases since making those statements. Today was no exception:

The company reported 72 cents a share on $1.88 billion, with both categories well ahead of Street expectations. Device sales and subscription sign-ups also beat expectations handily coming in at 2.18 million new customers and 4.4 million units sold respectively.

Analysts anticipated a high of 2.18 million units sold. Unit sales were all over the map, with most under 4.34 million, so RIM beat there as well.

And this is a good news story that keeps on giving: RIM offering up guidance for its first fiscal quarter with a new EPS range of 82 to 86 cents. The Street consensus was 76 cents, and Pablo Perez-Fernandez, a RIM bull, was at 77 cents. The company now offering a revenue range of $2.23 billion to $2.3 billion, nicely above the Street’s expectation of $2.017 billion.

Expecting fireworks in the stock from here might be a tall order however. Net subscriber additions hit 2 million for the first time in a quarter, up 32%, but are not running quite at the levels seen in the fourth quarter, although the Pearl is more than holding its own.

The stock is trading a little over $121 afterhours, but we are beginning to temper our enthusiasm for the shares. It is hard to imagine much in the way of multiple expansion from current levels; my guess is that the stocks valuation peaked 6 months ago. Of course the stock should be able to outperform this pathetic tape with even gradual multiple compression, due to RIM’s remarkable earnings growth.

And growth stock managers have few alternatives; RIM remains King.

Apple’s stealthy transition to a 3G phone will probably cause them to miss their June quarter earnings, and Apple shareholders might have to sweat out the next few months, if you subscribe to the theories laid that the Fast Money traders are floating in the video below.

But alternate theories are being bandied about, including international and grey market demand, which are straining Apple’s supply chain.

Regardless, this fight is just beginning. Bring your A-game Apple, RIM is not going to roll over.

“One Way” Gene Flails Away Looking for Apple Answers

SmartMoney TV

RIM Beats Street And Then Some
CNBC

The iPhone Shortage
New York Times

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