Tuesday, May 08, 2007

Research in Motion (NASDAQ:RIMM): Comments following analyst day

Couple of firms comment on Research on Motion (NASDAQ:RIMM) after Day 1 of its Wireless Enterprise Symposium (WES) in Orlando its analyst day:

- Goldman Sachs is telling investors to buy the stock saying they believe sales growth will unlock operating leverage in 2H FY2007. In the coming quarters we should see R&D and SG&A as a percent of sales drop, offsetting gross margin decline.

Firm also believes the new BlackBerry Curve, or the 8300, will be a very strong product and will ultimately prove stronger than the recent 8800 launch. This PALM killer should see success in both the enterprise and prosumer markets.

GSCO sees 33% upside to their $185 12 month price target, based on 30x oFY2009 (Feb-09) EPS x ESO of $6.10. They believe 30%+ earnings growth and strong cash flow justifies the multiple.

- Deutsche Bank notes the company announced several new software modifications and add-ons, but offered no real news.

While the firm thinks the co may have more product annoucements late this year, for the time being the company is heavily promoting the additional software features now available over its servers. While this includes some compelling applications (e.g. PBX over BlackBerry) they think this does little to alter the core RIM investment case
RIM disclosed some detail on the growth trends they are enjoying outside North America. While these sales are still low as a percent of total revenue, the trends are accelerating. The Pearl, in particular, has served as an important catalyst.

Reiterates their outlook that near-term product cycles can drive earnings, but these remain fuly reflected in the stock price. Maintains Hold and $125 tgt.

Notablecalls: I think GSCO's comments trump DB here. The chart looks good and I would not be surprised to see RIMM challenge 52-week highs soon.

Going for the consumer market sounds good but the hidden message here is the management may be worried about the future growth of the business side. On the other hand, RIMM has been fairly US centric and going beyond US will likely ensure growth will be strong for another couple of yrs. Not sure about the margins there, though. Also, based on checks done by JMP's Samuel Wilson, cell phone store sales staff have still not figured out how to pitch RIM's full QWERTY offerings, such as the 8800 and 8700 devices, to the consumer segment. Wilson points out that if a consumer suggests that email is not his or her primary application, sales people are quick to push users towards Windows Mobile-based devices such as the Samsung BlackJack and Windows-based Palm Treos.

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