Research In Motion: Color on Earnings

I wanted to highlight a couple of broker comments on Research In Motion (RIMM) following last night's results:

- RBC Capital notes that on product momentum (Curve, Bold) offsetting seasonality, Q2 guidance for $2.55-2.65B (86-93% Y/Y) was $100-150M above Street consensus. However, Q2 EPS guidance ($0.84-0.89) missed the Street  consensus ($0.90) on higher than expected investments (operation expenses were up 26-28% Q/Q), RIM's first guidance miss after beating Street EPS for 5 quaters. Gross margin guidance was 50.5%, slightly below RBC at 51%.

With the Smartphone market at inflection point and the company the best positioned it has ever been, RIM (at the cost of interim margins) is materially increasing investment (S&M, R&D) to achieve dominant global handset status. RIM expects its 'strongest back half in history', affirming RBC's expectations for a broad consumer assault in 2H08, including new handsets (Touchscreen, Flip, Slider, 3G Pearl, others). The Firm notes historically (e.g. 2005, 2007) RIM made similar investments to address larger opportunities, which subsequently paid off handsomely for investors.

If management executes its strategy successfully and expands its addressable market, RBC expects rising investor sentiment as investors look past interim margin pressure and recalibrate around RIM's full market opportunity. Maintains Outperform and $165 target.

- Goldman Sachs is lowering its FY09/10/11 EPS estimates to $3.62/$5.11/$5.86 from $3.85/$5.29/$5.95, and 12-month price target to $156 from $163, but maintains a Buy rating on the stock. While the Firm is comfortable adding to positions with the lower guidance out of the way (consistent with preview), Goldman prefers to wait before becoming more aggressive until they gain comfort that: 1) market expectations are more realistic, and 2) the company is executing well toward its August-September product launches.

Goldman now thinks RIM's EPS growth will be based on higher sales and lower margins relative to its prior expectations, as the company takes aggressive actions to respond to the iPhone's lower price points and Nokia's (NOK) decision to move the Symbian OS to an open-source, royalty-free model.

Notablecalls: RBC Capital's Mike Abramsky sure hit the bullseye with his RIMM comments yesterday. I have no real feel for the stock around $130. On the one hand, it's still one of the few high growth tech plays but with GSCO comments regarding lower margins (due to competition), I'm not entirely sure it's a bounce play here. Could go either way.

Comments

[wallawallabingbang]

Apple.

Good luck RIMM, you're dancing like Nokia now.

You can't spend fast enough, or well enough, to stop losing share to Apple.

Meantime, what's your P/E again?

[Shorting Should be Banned]

In ring# 1 is Nokia vs Google.

This allows Apple to focus its attention on RIM while the other 2 distract each other.....

[Daniel Jacome]

there is spprt @ 120, CSFB out with a note intraday saying $100 is their new target.