With all the attention paid to Apple Inc. and its iPhone, lost in the coverage is RIM's meteoric rise. And today's earnings report could ignite an after-burner like investors haven't seen yet.
RIM has done something other smart phone makers haven't been able to achieve: cross over from business and enterprise clients to consumers. And the company has done it so successfully that the BlackBerry enjoys a coolness factor that's right up there with the latest and greatest from Apple. In fact, RIM has achieved this transition so remarkably, that some analysts look at the latest iPod "Touch" from Apple as a kind of concession to BlackBerry's success.
Why? Think about it: the "Touch" is an iPhone without the phone. The message seems to be that Apple worried it couldn't attract BlackBerry users who missed enterprise connection and a tactile keypad when they're emailing, so Apple offered a new device that would "complement" the BlackBerry, not replace it.
At the same time, RIM took its BlackBerry, redesigned it, added color and capabilities and made it more appealing to consumers exactly when the company needed to to staunch the coming iPhone tidal wave. And it's working. Beautifully. The BlackBerry "Curve," the BlackBerry "Pearl," and the new wi-fi enabled BlackBerry 8820 are all selling like crazy.
Global Crown Capital for one believes that RIM is far outselling its own estimates of 100,000 a week. And now that Verizon is picking up new BlackBerry models, including the new CDMA Pearl, RIM's market is expanding even further.
It gets better.
This past quarter, RIM got approval to enter the Chinese market. This is kind of like a bonus round in a high-stakes game show. Don't count out Apple, of course, but don't underestimate the power of a striking head start in the smart phone market. RIM is the king of this hill. At least so far.
Lets take a look at the numbers as well: The Street is looking for 49 cents a share on $1.36 billion in revenue; both categories up sharply from last year's second quarter of 25 cents a share on $658 million. RIM still gets better than three-quarters of its revenue from business clients, but that mix is beginning to shift thanks to the popularity of its consumer-oriented handsets. Smart phones only make up about 5% or 6% of the 157 million handsets sold in this country. The market potential is huge and RIM is right in the sweet spot.
I'm not saying RIM shares have been overlooked, or are cheap. The stock is up 40% this quarter, and trades at a 45x forward multiple. That ain't cheap. Options action suggests a 15% move after-market today, in either direction, depending on the news. That follows the 17% pop the stock enjoyed following the company's first quarter report in June.
And despite all that action, Global Crown's Pablo Perez-Fernandez, one of the Street's most plugged-in wireless analysts, raised his 52-target to a Street-high $180 a share. He says he anticipates key new product announcements in this current quarter, and the calendar quarter of 2008. BlackBerrys remain in short supply, according to his channel checks, indicating ongoing, strong, consumer demand that doesn't seem to be letting up. RIM enjoys a "replacement cycle" that may be equal to, or even rivals, the replacement cycle Apple counts on.
Finally, let's talk competition: Nokia tries, but doesn't succeed. Same with Motorola . Palm's worth watching over the next year or so to see whether its new management team (including key members from Apple) can turn the new, $99 Centro smart phone into some kind of BlackBerry rival. But there's certainly no immediate threat there. Same goes for Apple.
There's a lot of hype swirling around RIM but there appears to be quite a bit of fire under all that smoke. We'll get a much better idea just how hot that fire is burning after the market closes later today.
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