Here we go again: another new round of competition in the white-hot smart phone sector, and once again, some of the experts are writing off Research in Motionas it tries to fend off the oncoming Apple iPhone steamroller. Or is it the other way around?
Not so fast.
Just this morning, investors had to deal with downgrades on each from Canaccord Adams' wireless analyst Peter Misek despite a recent "buy" reiteration on Apple shares. Maybe it's a valuation call? Maybe it's a competitive one. But at a time when trends suggest the smart phone sector is enjoying a renaissance, even as the economy continues to sputter, it seems to me that this is a rising technology tide that will float a lot of boats. Yes, even Palm.
RIM will report earnings this Thursday and there's every indication that this company might surprise to the upside. Several analysts suggest estimates for June are simply too low, that margins are stable - if not improving - and with a stuffed product pipeline, outlook should be good as well. The market is still awaiting the hybrid Blackberry that sources confirmed to me would be coming early Summer from Verizon and that promises to give the Palm Pre a run for its money. Not to mention the new Pearl 3G which comes out the same day RIM releases earnings. And remember the dramatic effect Verizon's "buy-one-get-one-free" promotion had on RIM's earnings the last time around.
I'll do a more complete earnings preview for RIM later in the week, but both Goldman Sachs and JP Morgan just raised earnings estimates, with Canaccord trying to lower expectations today (but hey, that's what makes a market!).
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On the Apple front, the new $99 iPhone 3G price should juice sales in a big way, and the new 3GS goes on sale this Friday with some blogs reporting Apple has already sold out of availability inventory. (AT&T said to check with Apple; Apple isn't commenting.)
And yes, the Palm Pre had a great first week. Oh, and Nokia seems to be doing well, too.
Just this morning, in fact, Pacific Crest's wireless analyst James Faucette released his handset demand report indicating that North American month to month sales in June are trending higher, even as Europe begins to soften. The Blackberry, he says, is picking up momentum in Europe, but still faces some second half risks. He's tracking continued momentum in the Palm Pre sales, and while he calls it a near-term positive for partner Sprint , he does concede that long-term concerns remain. And he says Apple's price reductions on iPhone should stimulate sales for current models.
So, who's the winner? The answer is simple: You, me, investors and all of these companies. That's the thing with the smart phone sector right now. While we're focused on quarter-to-quarter earnings, and the ultimate winner who will control the market, as Microsoft has done, or as Google is doing, the smart phone sector isn't going to be a zero sum game.
Sure, there are handsets with clear advantages. Apple's App Store today soundly differentiates itself from RIM, Nokia and Palm. But that's today. Developers go where the market and the money is, and these other platforms will also start to see their apps base grow. Apple has the head start, but these competitors aren't sitting still. And all of them continue to drive innovation higher, and prices lower.
With so many sub-sectors in tech all trying to find their way, the smart phone side of the equation continues to grow, continues to shine, continues to be the best opportunity out there for investors. And each of these companies offers a compelling investment story to tell. Today's Canaccord report doesn't make sense. Last week's Collins Stewart report about a slowdown in iPhone manufacturing read much the same way. Some companies are better than others in the sector, but all are intriguing. RIM's report should go a long way toward telling us whether that premise still rings true, or if this opportunity has already passed investors by.
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