Research in Motion (RIMM)

Approximately 2.18 million net new BlackBerry(R) subscriber accounts were added in the Q1 08. At the end of the quarter, the total BlackBerry subscriber account base was over 14 million.

The chart for RIMM shows a breakout that occurred just over $112. Even with the recent volatility, the stock has not seen a great deal of downdraft and the next level for a longer term investment is $132, the level it reached last November. Downside towards $99 is now what will become the next floor if momentum does not continue, but it does seem more realistic that the $115 level will be support if an earnings based breakout cannot hold.

Downside? Until corporate America decides to switch to another service, (which is hard to imagine) Research in Motion should continue to dominate with over a 55% worldwide market share.

A word to Apple and Microsoft: Be careful here...remember what happened to Palm?

Research in Motion has long been the leading force in the wireless, corporate e-mail market, with its BlackBerry handhelds and push e-mail service becoming the standard choice for businesses looking to wirelessly connect employees. The consumer market, however, didn't pick up on the BlackBerry for quite a while. This has been changing recently, due to technological improvements and greater affordability. RIM identified the potential growth in the consumer market and moved to capitalize on it. The release of its Pearl and Curve devices are clear indications that the company is targeting more than just its usual corporate customers. In addition to introducing feature-laden, aesthetically pleasing devices to woo consumers, the prices for BlackBerry service has dropped noticeably. An unlimited BlackBerry e-mail and Internet plan now runs for a little as $20/month, making RIM's products and services accessible to a much larger group of people than previously.

The results for RIM have been substantial; the introduction of the Pearl in September of 2006 was wildly successful, with RIM's CEO Jim Balsille saying, "The launch of the Pearl has been the most successful BlackBerry launch that we have ever had. Our intention with Pearl was to open up a new market segment for BlackBerry, and this is what we have experienced."

Research in Motion (RIMM) has been the darling of the working crowd for some time. Nothing has yet to come close to their capabilities with email push-technology. Email has become the mainstay of corporate life, along with text messaging, and anyone who has used a BlackBerry device is fully aware of its addictive nature.

Yet recently, in walks Apple (AAPL) with an announcement that along with the release of its SDK development kit, it will be looking to lock horns with RIMM as it will also be offering a form of push-technology in the next release of the iPhone. Microsoft (MSFT) has also been nipping at the heals of RIMM as it would like to produce a device that has all of the features of the BlackBerry along with a suite of Microsoft products.

So, where does that leave RIMM? From the looks of earnings, it does not seem to matter much what these other pesky companies say or do as their infiltration into the handset market is widespread and earnings are here to prove it. After hours Wednesday, the stock popped up in response to the good news, confirming that RIMM is still firmly in the driver’s seat.

Research in Motion's efforts to expand beyond its core enterprise customer base are paying off. The introduction of its Pearl and Curve devices indicate the company's interest in tapping into the consumer market, where growth potential is substantial. These consumer-friendly devices have been successful; coinciding nicely with the release of the Pearl, RIM's total number of subscribers in FY2007 was up 63% over FY2006. The Curve's impact is not yet evident, but, considering the success of the Pearl and the Curve's plethora of features for both enterprise customers and consumers alike, it should further increase RIM's viability in the consumer smartphone market.

The reason? Anyone can get a Blackberry Pearl for $99 from almost all wireless carriers. In comparison, when the iPhone was released there were issues of it being too expensive and even though the iPhone is unique, but its features appear in many other devices at a fraction of the price. One can argue all day about the intricacies of those features and whose are better, but for the vast majority of people, those intricacies are irrelevant while price is not. In a slowing economy, people will choose price for a commodity like device.

Research In Motion RIMM, the manufacturer of the (Black-berry turned in some exemplary numbers. For the three months ended Aug 30, 2008 (RIM's Q2, 2009), revenue was $2.58 billion, up 15% from $2.24 billion in the previous quarter and up 88% from $1.37 billion in the same quarter of last year. The revenue breakdown for the quarter was approximately 82% for devices, 13% for service, 3% for software and 2% for other revenue. During the quarter, RIM shipped approximately 6.1 million devices, and, grew their subscriber base by 2.6 Million. Fact: Blackberries are a status symbol in Asia [as is the iPhone] - these accounts rarely contribute to an increase in the subscriber base - for, - all that these devices need to do is to do - is to look pretty, and be compatible with the local GSM networks [and ocassionally work with WiFi.

Awesome numbers. in fact, for fiscal 2009 [ending Feb 2009], top-line growth of 80% and a growth of 70% in EPS is at the low end of what the company thinks they can churn out [awesome]. For fiscal 2010 [March 2009 to Feb 2010], I think that a growth in revenues of 40% yoy and EPS of 35% yoy [assuming slightly lower gross margins moving forward] are for sure numbers that RIMM can deliver on.

Even more important, the subscriber base grew by 2.6 Million to 19 Million. These are the corporate accounts that are addicted to Blackberry's secure e-mail that is supported by the customer's respective corporate IT department(s). Net income for the quarter was $495.5 million, or $0.86 per share fully diluted, compared with net income of $482.5 million, or $0.84 per share fully diluted, in the prior quarter and net income of $287.7 million, or $0.50 per share diluted, in the same quarter last year. That is an increase of 68% y-o-y.

Management

In 1984, Mike Lazaridis and a couple of others founded RIMM- with $15K from family, and a contract from GM. Jim Balsillie joined the company in 1992 and is Co-CEO with Lazaridis [a very strange arrangement, but the success of RIMM will ensure that this arrangement will not be questioned for now. Other top brass have been at RIMM for in excess of a decade, and but for the back-dating of options in 2006, and accounting issues [with Lazaridis and Balsillie personally coughing up the corporate costs for these corporate governance issues], they have done well - but they will be tested like they never have been - in the next twelve months.

Balance Sheet

RIMM's balance sheet is liquid, with no long-term debt, and cash of $2.2 Billion. More importantly, TTM ROA was 33% - with a financial leverage of 1.32. ROE was 43% for the same period. Cash flow is at at $2.5 Billion/year run-rate for fiscal 2009 - with FCF in excess of a billion [run-rate for fiscal 2009]. My only concern with the balance sheet is the growth of Trade Receivables from $1.17 Billion on March 1, 2008 to $1.77 Billion on Aug 30, 2008, an increase of 51%, and other receivables rose by 59% from $75M in 03/2008 to $118M in 08/2008. In the same period, inventories rose by a more modest 29% from $396M in 03/2008 to $512M in 08/2008.

The competition

I expected GOOG's Android to be much better than it is. For starters, I was sure that the device would support Microsoft Exchange, but it doesn't. This buys RIMM more time to improve their software for their Bold [RIM's answer to the iPhone]. I've seen the first revision of Bold, and it is god-awfully slow when surfing the internet using its WiFi radio. The GOOG/T-Mobile T1 is a lot better, and it's browser, and WiFi radio are on par with iPhone. I did not get an opportunity to check out all three devices at a 3G access point - so, I'm sure that someone reading this will fill in the blanks. I know the answer, but I do not want to claim that I looked at it.

The Bottom-line: If you need a phone with Bluetooth 2.0, OBEX/DUN/A2DP, voice dialing, Built-In GPS Navigation [as opposed to a third party solution], want your corporate IT Department's support, and want to cut and paste, then The BlackBerry wins. Whereas, if you want to waste your time on FaceBook/YouTube, text, use not-so-secure e-mail and look cool doing it, then the iPhone is for you! In a single sentence, corporate accounts prefer and will for now continue to prefer the BlackBerry.

The temporary dip in the stock's makes RIMM a buy at the current quote.

Taking a closer look at the features users love and hate about their iPhones and BlackBerrys (as part of a March 2008 survey of 864 smart phone owners), Apple boasting a 79% Very Satisfied rating for its iPhone models and RIM garnering a highly respectable 54% rating for the BlackBerry. First, we asked RIM BlackBerry owners. By an overwhelming margin they told us the feature they liked most is the BlackBerry's exceptional access to email (56%).

Top Blackberry Features: By a wide margin, respondents to a March 2008 survey indicate that the Blackberry's email functionality (54%) is their favorite feature compared to size (7%), internet access (5%), keypad (5%), Ease of Use (4%), Calendar (2%), GPS (2%).

No other feature comes even close in terms of popularity. As a respondent explains, "The email integration of the BlackBerry 8800 is probably its single best feature, but I am constantly amazed at the quality of the phone itself." Another one adds "I like the seamless way my BlackBerry works with corporate email, and the way you can call a number from within an email by highlighting it."

RIM's decision to open its proprietary network by offering BlackBerry service for non-BlackBerry devices has significantly broadened the company's reach in the smartphone market. RIM's services segment provides a steady, high-margin stream of revenue; offering these services to a larger customer base gives RIM greater access to this revenue stream, which will become increasingly significant as more non-BlackBerry smartphone users begin using RIM's e-mail and Internet services.

Bull times for RIM. RIM just launched a website where users can browse potential applications conveniently. It successfully developing an updated Smart Card Reader.

Fortune magazine just put out its fastest-growing companies list, and RIM took top spot, with good reason.

Thanks to its Blackberry handsets, which are growing increasingly more popular, RIM’s profits have expanded 84% in the last three years.

Research in Motion has long been the leading force in the wireless, corporate e-mail market, with its BlackBerry handhelds and push e-mail service becoming the standard choice for businesses looking to wirelessly connect employees. The consumer market, however, didn't pick up on the BlackBerry for quite a while. This has been changing recently, due to technological improvements and greater affordability. RIM identified the potential growth in the consumer market and moved to capitalize on it. The release of its Pearl and Curve devices are clear indications that the company is targeting more than just its usual corporate customers. In addition to introducing feature-laden, aesthetically pleasing devices to woo consumers, the prices for BlackBerry service has dropped noticeably. An unlimited BlackBerry e-mail and Internet plan now runs for a little as $20/month, making RIM's products and services accessible to a much larger group of people than previously.

The results for RIM have been substantial; the introduction of the Pearl in September of 2006 was wildly successful, with RIM's CEO Jim Balsille saying, "The launch of the Pearl has been the most successful BlackBerry launch that we have ever had. Our intention with Pearl was to open up a new market segment for BlackBerry, and this is what we have experienced."