Tech Check

RIM Soars, Stuns the Street

So much concern, so much talk about dealing with disappointment, and a perceived slowdown in Blackberry momentum amid so much media clamor about anything and everything Droid from Google and what does Research in Motion do?

Blows everyone away, that's what.

I can't find a single analyst who isn't stunned by the Research in Motion earnings reporttonight. Just goes to show you what operational execution can do for you. In the midst of the most heated competition RIM has faced in its entire corporate history, it absolutely blows past Wall Street expectations and offers up guidance that puts an exclamation point on its ongoing momentum. You wonder how Wall Street got the RIM story so wrong.

No matter; investors are sopping up RIM shares with a vengeance on this news: The company reports $1.10 a share against the $1.04 expected on revenue of $3.92 billion versus the $3.8 billion that Wall Street was looking for. Going deeper into the report, RIM says it shipped 10.1 Blackberrys on the quarter. The Street projected 9.54 million units. The company signed up 4.4 million new subscribers versus the 4.12 million expected.

Looking forward to RIM's fourth quarter, the company now sees $1.23 to $1.31 in earnings per share, which is way better than the $1.12 consensus. (The company also disclosed that there would be a 3-cent a share positive impact from the cancellation of RIM's plans to buy back 12.3 million shares of stock during the fourth quarter.) The company expects revenue in the $4.2 billion to $4.4 billion range, which is substantially better than the $4.11 billion analysts expected. The company's new subscriber range of 4.4 million to 4.7 million is essentially in line with the 4.5 million consensus, and RIM anticipates gross margins of 43.5 percent.

This is particularly good news amid so much competition from Apple and iPhone, and it's another example of how these two companies own the smart phone market. As a comparison, Palm released earnings at around the same time, posting a worst than expected loss of 37 cents (versus the consensus of 35 cents in red ink), and while the company's smart phone shipments were impressively above estimates at 783,000 units, the sell-through was only 573,000 units. That means Palm is shipping a lot of devices, but a lot of its smart phones are still sitting on store shelves waiting for buyers.

In the meantime, RIM was able to see a better than expected topline, which means the market is responding well to its new handsets. The RIM story isn't merely about cost-cutting. This is a company still enjoying big success in the marketplace, at a time when most experts didn't expect it.

Shares jumped 10 percent on the news. Watch for a long-delayed analyst upgrade parade come Friday.

Correction: An earlier posting had the wrong number of units shipped, the error has been corrected in this post.

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