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Old 09-29-2004, 06:52 PM   #1 (permalink)
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Default [09-29-2004] RIM riding BlackBerry Demand

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RIM riding Blackberry demand

Results tomorrow: Analysts expect ninefold increase in earnings
Can anything stop the Research In Motion Ltd. steamroller?

Investors will likely find the answer is 'no' when the Waterloo, Ont.-based company issues second-quarter results after markets close tomorrow. That's because demand for RIM's Blackberry device, which provides wireless access to e-mail, is soaring. RIM continues to strike deals with phone carriers around the world to get a growing array of products into the hands of more users. It's also hiring hundreds of people by year's end to keep up with skyrocketing demand.

"Wireless e-mail has hit an inflection point," wrote Bear Stearns analyst Andrew Neff in a research note to clients yesterday. "RIM is well positioned to benefit from this trend."

Analysts are looking for US43 cents adjusted earnings from RIM, on average, and sales in the range of US$305-million and US$319-million, according to a Thomson First Call survey. That's almost a ninefold increase in earnings over the same quarter last year when the company reported US5 cents earnings per share and US$126-million in sales.

With RIM only starting to sell products like the Blackberry 7100t, a highly-touted new consumer-oriented device, analysts expect the company to raise its sales targets for the next two quarters and fiscal 2006.

Analysts and co-chief executives Jim Balsillie and Mike Lazaridis are optimistic as the market for RIM's Blackberry and other products with phone-like capabilities is still nascent. Few people outside the business community use the Blackberry device. Market researcher IDC expects shipments of mobile converged devices, such as the Blackberry and PalmOne Inc.'s Treo 600, to grow 20% on a compounded annual basis through 2008.

"Analysts continue to underestimate the potential of this company," said Paradigm Capital analyst Barry Richards. Additional target increases and soaring earnings from RIM would be impressive given that RIM lost money in both 2002 and 2003, he added.

RIM isn't without challenges. Still hanging over it is a court case with NTP Inc., a small Virginia-based company formed to protect the patents of inventor Thomas Campana. NTP may be able to block RIM from selling its Blackberry in the U.S. should it win.

NTP, which owns patents but doesn't sell products, may be able to block RIM from selling its Blackberry in the U.S. should it win the dispute.

RIM's stock took a dive this summer after a patent-litigation specialist said RIM's appeal of an earlier NTP court victory isn't likely to succeed. RIM stock hit a 52-week low of US$53.29 on the Nasdaq on Aug. 13, but the shares were back up to a high of US$76.98 yesterday.

Most observers expect the two parties to settle the dispute out of court, but the uncertainty has tempered some observers' enthusiasm for RIM. RIM was ordered to pay US$53-million in damages and an 8.55% royalty on Blackberry sales in North America earlier this year.

"No one has any idea how the trial is going to turn out," said Kona Shio, an analyst with Conscius Capital Partners. "[The case] could be something that could hurt RIM going forward."
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