Wednesday, January 10, 2007

Calls of Note Part 1

- Merrill Lynch is defending Research in Motion (NASDAQ:RIMM) after Apple launched its iPhone which combines cellphone and multimedia features in a touch screen only device causing RIMM's stock to go down hard in yesterday's trading.

In firm's view there are two distinct segments in the smartphone market: multimedia and messaging. The iPhone has a strong multimedia suite that will appeal to consumers, but they believe RIM's Blackberry smartphones with hardware keyboards have superior messaging (secure email) features targeted at prosumers and enterprises. They are also uncertain of the iPhone's ability to synch with Window-based contacts/outlook that could limit its enterprise adoption.

iPhone's pricing of $499-599 is much higher than smartphones from RIM, Palm, Nokia, Motorola and Samsung that are available for $0-300 (after rebates). First-time smartphone buyers may be attracted to iPhone's "wow" factor, but up-front price could divert them to cheaper alternatives which come with built-in an expandable memory slot (2Gb for ~$70), a full keyboard, and higher-speed (3G) networks. Regardless, the iPhone expands the general interests in smartphones, and could help support healthy pricing in the smartphone market (i.e. the Starbucks effect.)

The sell off in RIM stock is overdone, in firm's view, and mostly reflects high expectations with the Pearl platform. However they think Pearl's momentum can continue and will further accelerate with the imminent launch of Indigo and Crimson (full keyboard siblings of the Pearl). Firm believes iPhone's multimedia feature set and consumer focus could have a bigger overlap with Palm (PALM).

Reits Buy and $165 tgt on RIMM.

Notablecalls: ML's comments sound reasonable. I'd love to buy RIMM around 3-4 points lower, though. iPhone's no RIMM-killer.

1 comment:

A said...

Amen Brother! Thanks much for sharng your valuable insights on your blog. Have a good weekend!