RIM Is on a Quest to Remain Competitive

Research in Motion (RIMM) has been feeling pressure as of late from competitors such as Apple (AAPL), Palm (PALM) and Nokia (NOK) as they are crowding into the smart phone market. Yesterday’s earnings show that Research in Motion is still strong and remains at least a decent competitor. Earnings per share were expected at $0.94 per share vs. the actual of $1.12 and adjusted at $0.98 and revenues of 3.42 billion vs. the expectation of 3.41 billion. However, the real question will be how successful will Palm’s Pre and Apple’s new iPhone 3GS be.

In aftermarket trade, Research in Motion moved down fairly substantially to the mid $72 level. Reasons for this may include an expectation of much better results than reported or maybe investors are finally realizing that the move from $35 per share on March 9 to the $86 handle just a few days ago was a little much. Sometimes beating expectations just isn’t enough when formidable competitors are stocked with heavy ammunition.

Apple is currently predicting sales of 500,000 to 750,000 iPhones in the first week of sales. This shows great strength in Apple’s ability to continue to innovate and break into the business market. Cell phone applications from Apple have also continued to grow seemingly exponential which may steal some extra revenue. This also creates a large barrier of entry for any new smart phone maker that would like to be as innovative and flexible as the iPhone. Research in Motion and Palm will have to attract developer’s to create applications or internally create them on their own.

We see the cell phone market becoming increasingly competitive and we will continue to look for one of the smart phone companies other than Nokia to establish dominance in China and other emerging nations.

Comments

[Frank Castle:]

I think my main issue with Apple's "big weekend" is home many of that number no matter how large or small is limited to previous owner upgrading. Clearly Apple and at&t need NEW subs and I'm unsure there is enough in the new model for someone who didn't buy previous iPhones to rush out and get one now. In a sense Apple is in a vacuum. At the end of the year iTouch will be the largest percentage of their mobile platform and continues to be the device iPod users migrate to.

The main issues have still not been addressed:

- limited to one carrier in the states
- data plans are still cost restrictive to many consumers
- enterprise management and security isn't as robust as Blackberry for those corporations with specific needs.

The $99 3G is more a driver then 3GS for new subs but refurb iPhones have neen available for months as well Blackberry has had many devices at similar pricing. Frankly I think the market is in a static state and won't see the next growth spurt until they can make plan pricing more attractive or the economy and jobs come around.

Jun 19 06:09 AM

[Aussie Machead:]

In Australia we are in a better position with 4 carriers and phone plans which don't integrate data so you can purchase and change data plans as and when needed. I feel sorry for my friend in Connecticut who would love to get an iPhone but is in a Verizon area and can't receive AT&T. Seems access is really restrictive in the USA. The sooner Apple in the US gets some other carriers the sooner we will see the market place working as it should. If four carriers in Australia can offer packages as low as $30 a month phone plan and if you add data its from $10 a month, how is the AT&T deal so attractive to Apple??

Jun 19 06:29 AM

[hwyflier:]

There is plenty of room for all players in this market. It is a shame that RIMM can post such stunning numbers, only to have its stock pummeled in after trade. Stock price is 50% business success, 50% pure emotion. It was a down emotional day, otherwise those same numbers might have seen the stock up 5 bucks. When buying or selling you need to take the market's emotional pulse before your decision.

Jun 19 10:53 AM