Wednesday, June 25, 2008

Research in Motion (NASDAQ:RIMM): RBC Capital cuts Q2 ests on Bold delay

RBC Capital is out with a somewhat cautious call on Research in Motion (NASDAQ:RIMM) saying new data points suggest AT&T may launch the 3G Blackberry Bold mid-Aug, a 2-3 week delay to their prior launch estimate, as it continues to stabilize the device on its HSPA network. Rogers appears on track for July launch, and other carriers (Vodafone, DoCoMo, TIM, O2, others) are still expected later in August.

Revised Q2 Guidance. As discussed in their Q1 preview, Q2 guidance is highly sensitive to Bold launch timing; RBC est Q2 guidance becomes $2.5-$2.6B rev and $0.91-0.94 EPS (vs. prior est for $2.6-2.7B and $0.94-0.97).

According to RBC this development mirrors early stability issues RIM faced with UMTS, EV-DO, EDGE networks, including a Nov 2005 delay with the Blackberry 8700 on AT&T, subsequently resolved by RIM to maintain its hallmark battery life user/experience. 3G is significantly more power consumptive than 2.5G (higher processing demands); and the Bold also uses a new Operating System (v4.6) and a new Marvell 624MHz processor/chipset.

Given street expectations for a late July/early Aug Bold launch, and with valuation at 36x conc. FTM P/E, news of the delay may offer near-term valuation volatility; firm's view any interim price weakness as an opportunity for longer-term investors to accumulate the shares. This delay does not affect their longer-term thesis.

Notablecalls: Expect to see weakness in RIMM today in reaction to RBC's estimate cut. The stock simply can't afford even a slightest miss here. Think we will see RIMM sub-$140 today.

Kudos goes to RBC Capital's Mike Abramsky for continued excellent coverage on RIMM. He's really the Axe in the space.

1 comment:

The HardHead Fund said...

I believe RIMM missed expectations because people were waiting to see the new Apple iPhone. If the release of the iPhone is a hit on July 11... goodbye RIMM. I shorted RIMM at 136 on the Apple WWDC. Wished I had more confidence and shorted more than just 200 shares. It looks like RIMM will be headed to ~120. Looking for Apple to break 200 in July if the market holds up.