Research in Motion (RIMM) announces earnings – profits up 68%

By: ispeculatornew
Date posted: 09.17.2010 (5:00 am) | Write a Comment  (5 Comments)

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Research in Motion, the Canadian smart phone maker that competes with Apple’s (AAPL) Iphone and rivals that run Google’s (GOOG) Android has had more than its share of bad news and bad press this year and even has started being compared to Palm. It would also seem to some that the company is doomed. However when we entered our most recent trade on RIMM, the basis was mostly fundamentals.

For all of which is written about the company, you could almost believe that the company is on the brink of bankruptcy but even in recent quarters, Research in Motion has continued to experience both growth in revenues and in profits. There are concerns about the future especially when new phones like the Torch are released but it’s too easy to be overly negative about RIMM. So you would not be surprised to learn that Bloomberg reported that short interest had doubled to over 31 million (double from mid-April).

Today, Research in Motion announced solid results and it’s safe to say that short investors will not have a great day tomorrow as RIMM announced earnings of $1.46 per share, a 68% increase from last year and $0.10 per share more than what analysts had expected. The stock gained 2.1% today and is up over 7% after hours today as guidance was also stronger than expected. Sales for the past quarter increased 31% to $4.62 billion. Combined with solid results from Oracle, it looks like Tech stocks will have a good day tomorrow.

The big question of course is what direction RIMM will now take. Its guidance was much better than expected but it is not strong enough to reverse momentum that has taken the stock down from about 85$ one year ago to around 50$ in today’s after hours trading. It will be interesting to see what kind of future products RIMM can produce in order to regain more new consumers. It is key in my opinion for the company to make big initiatives that will encourage developers to work on apps for Blackberry. The lack of apps is the main reason why there is a lack of excitement for its products at the moment. It now has 50 million subscribers and given the right incentives can be a very attractive platform. In fact, according to comscore, RIMM still has the largest market share for smart phones.

Personally, I’m mildly optimistic and am feeling better about the long position on Research in Motion. Oh and while I’m not sold on the Torch or other initiatives such as the upcoming Blackberry tablet, the executives confirmed in today’s earnings call that the Torch had strong sales and was a big part of the strong results/guidance. Knowing all of this, what is your view on Research in Motion?

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5 Comments

  1. Comment by Zavi — September 17, 2010 @ 7:32 am

    great long-short trade! i’m not sure on the direction, cause Apple is increasing its smartphone market share… and growing innovative apps is the future!!

    tough call for me!

  2. Comment by Sean Browne — September 17, 2010 @ 11:34 am

    I personally like the Blackberry over the iphone. For me it’s almost like saying “Are you a PC or a MAC”. The difference for me with BlackBerry I would say is having the same functions like a PC Mouse. I am looking forward to the new Berry but it closely resembles an iphone. Tough call for me as well but I guess I can wait and see what the reviews will say about the new Berry before I make my next upgrade.

    C’mon Berry, do it right!

  3. Comment by IS — September 17, 2010 @ 12:48 pm

    @Zavi – No doubt, Apple and perhaps even more Android are huge threats

  4. Comment by IS — September 17, 2010 @ 12:49 pm

    @Sean – Yes, I feel you. I think they both have great pros but really think that getting some more apps done as soon as possible, is critical for the company.

  5. Comment by MikeS — September 18, 2010 @ 5:52 pm

    I only like RIMM in short term for in-the-money covered calls. Longer term I think they’ll be around, but I prefer AAPL or GOOG for growth in smart phones.

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