Research in Motion’s Accurately Predicted Results

Research in Motion’s (RIMM) earnings surprise last Thursday was predicted by its RBP Probability. After the bell on Thursday, RIMM released its results for the fiscal year ending February 2009. Revenue for the fourth quarter was $3.46 billion, which represents a remarkable 84% increase over the same quarter a year earlier.

RIMM’s RBP Probability was 98.3% immediately prior to the announcement. (See RIMM’ RBP snapshot as of 4/2) Management has consistently delivered the company’s Required Business Performance historically, and with the stock down by more than two-thirds in the past year this requirement was quite low.

For instance, at $43/share, the performance implied by the price of the stock – the Required Business Performance – was revenue of $14.47 billion for the upcoming twelve months. This translates to a growth rate of 52.5%. These numbers are extraordinary, and at some level it’s incredible we can even talk about them seriously. But this is why RIMM is such a popular stock. It is a large company that is, quite simply, growing at astronomical rates.

Anyhow, RIMM has done such an outstanding job of growing in the past that 52.5% was actually quite attainable. Any doubts that it was attainable were quashed when the company reported revenue growth of 84%, even in a chaotic economic environment.

Breaking down this revenue growth in to RBP components by business segment reveals how the company was able to report such strong results. RIMM shipped 7.8 million units in the fourth quarter, which is a whopping increase of 77% over the 4.4 million it shipped in the same quarter a year earlier. Yet the company’s RBP indicated that it need “only” grow unit sales by 54% to support its current stock price. And the $43 price tag on the company’s stock implied subscriber growth of 8.7%, whereas the company reported that new subscribers in fact grew by 18.5%.

It seems the market had extremely low expectations for this company relative to what it was capable of producing. As such, the stock was up more than 20% on Friday.

Comments

[JamesApple:]

Samsung, LG, Nokia, HTC, Apple, Google, Sony Ericsson, Palm, Motorola, Panasonic, and the host of enterprises who are entering the business smartphone market, are you ready and capable of capturing the consumer and business smartphone market from RIM?

Apr 05 12:22 PM

[JamesApple:]

AT&T, Verizon, Sprint, Telus are all pushing more Samsung and LG handsets into their line of phones. I see a lot more Samsung phones in customers' hands than any other makes lately.

Apr 05 03:38 PM