Friday, April 3, 2009

Research in Motion (RIMM) Soars on Solid Numbers

Car sales? Nevermind.
Home sales? Nevermind.
Factory output? Nevermind
Service industry? Nevermind

Forget the weakness in those factors - the true sign of America's stalwart economic engine are sales of video games and smart phones. We should do away with those silly sign posts of the last century - it's time to evolve people.

Research in Motion (RIMM) surprised to the upside after they (wait for it).... beat lowered expectations (lowered in February mind you - but please don't let facts get in the way of a Boo Yah moment) The stock surged 20%+ in after hours and once more is a "2nd derivative improvement" that clearly shows signs of health are emerging from the abyss.

On a serious note I liked the chart action the past few days, and have been seeking some technology exposure but since I don't play the "gambling before earnings game" I sat this one out. Sometimes that costs you - but 50/50 outcomes are just not my thing. If not for the imminent jobs report coming in a few hours, the "smartphone economy" tell should of been worth at least 3% to the upside for the stock market. Hopefully those darned unemployed Americans don't mess this up with their... their... lack of smartphones.

Research in Motion beat by 6 cents, and although gross margins sunk from trend, there is always "next quarter" when they are expected to rebound sharply. This is one of the true few growth stories still left in technology, which is essentially a cyclical sector very little different from industrials but with much more hype. RIMM is one of the few standouts although I find it a bit strange there was so much caution that deep into their quarter - which cratered the stock. Not fun for shareholders then but it's a traders market - not buy and hold. The stock should open at or near its early Feb high ... taking you right back to where you were before the warning.

Via Reuters
  • Research In Motion (RIMM) posted surprisingly strong quarterly earnings on Thursday and offered a rosy outlook that signaled further growth despite the global economic slowdown as consumers embrace its newest BlackBerry smartphones.
  • The results, which also revealed RIM now has a total of about 25 million BlackBerry subscribers, sent the company's shares about 21 percent higher in after-hours trade.
  • RIM's profit rose to $518.3 million, or 90 cents a share, in its fourth quarter ended Feb. 28, from $412.5 million, or 72 cents, a year earlier.
  • The results topped the expectations of analysts, which had been dampened by a profit warning that RIM delivered in February. (boggling)
  • Revenue was $3.46 billion, up 84 percent from $1.88 billion in the year-before quarter, putting it on the high end of RIM's December forecast for revenue of between C$3.3 billion and $3.5 billion.
  • "This is wildly better than people were looking for," DSAM Consulting analyst Duncan Stewart said of the company's overall results. "Getting improvement in both margin and growth at the same is a rare thing in the field of technology."
  • For the current quarter ending May 30, RIM expects revenue of between $3.3 billion and $3.5 billion and earnings per share of 88 cents to 97 cents. Gross margin is expected to come in between 43 and 44 percent, the company said, up from 40 percent currently. Investors had been concerned about gross margins after a terrible recent showing. RIM's shift from its high-spending business-user focus to a broader, costlier consumer smartphone market has crushed margins. In the span of a half year, RIM's gross margins narrowed to 40% from the 50.7%.
  • It expects to add between 3.7 million and 3.9 million subscribers. It added 3.9 million this quarter.
  • On costs, RIM told analysts that operating expenses will increase 12% in the quarter as the company spends more on research and development and takes on more employees.
  • Analysts had previously expressed concern about RIM's ability to maintain momentum during the recession. Retail consumers in general have curbed spending, which may mean they are not willing to pay more for flashy new smartphones. But the plunge in spending may be coming to an end, Misek said. "There was a big rebound in consumer demand in mid-February," he said (i.e. a few days after we warned?) Balsillie said BlackBerry demand in the retail market was stronger than the company had expected following the holiday season, in part thanks to aggressive promotions from carriers.
  • Meanwhile, large corporations that use the BlackBerry as the mobile communications tool of choice have also cut their budgets. Even so, Balsillie said, demand from corporate customers is also staying strong.
Via AP
  • The company has been targeting the consumer market after enjoying success in the corporate market for years.... about half of subscribers are now consumers. "We're still in the rapidly emerging stage of a land grab," co-CEO Jim Balsillie said during a conference call with analysts.
  • RIM controlled about 20 percent of the smart-phone market at the end of 2008, up from about 11 percent a year earlier. Balsillie said the company is still in the early stages of its growth. It will release new BlackBerry models in the second half of the year.
  • "These are lifestyle devices that people use arguably a couple of hundred times a day and soon to be more," Balsillie said. He predicted BlackBerry addicts will increasingly use their smart phones for social networking, e-commerce and mobile video.
  • "It was an outstanding quarter," (analyst) Misek. "They might not be buying cars or homes, but these little things make them feel better." (we don't need no stinkin cars or homes - we gots us some smart phones; signal of strength in economy)
Last - never, ever dismiss the celebrity culture in the U.S.
  • Misek said President Barack Obama's endorsement of the BlackBerry helped. "One of the factors I don't think people appreciated was the Obama factor. Obama is an avid BlackBerry user and he's probably the biggest celebrity on the plant. You can't get a better endorsement than that," Misek said.
No position

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