Santa came a few days early for Research In Motion Ltd.
The company became the star of the Nasdaq Dec. 23, the day after RIM reported substantial third-quarter results and a stellar outlook for the future. Indeed, the company’s stock price jumped from around $45 per share to almost $71 per share following the company’s earnings news. With volume of more than 58 million, RIM was the Nasdaq’s most active stock.
RIM reported revenue for the third quarter of $153.9 million, up 22 percent from the $125.7 million it scored in the previous quarter. The company’s net income stood at $16.3 million or 20 cents per share, compared to a net income of $2.1 million or 3 cents per share in the prior quarter. RIM recorded a provision of $9.2 million or 11 cents per share due to its ongoing court battle with NTP Inc. The number of BlackBerry subscribers increased by 154,000 to a total of about 865,000.
“RIM completed another successful quarter marked by strong performance and a multitude of BlackBerry launches around the world,” said Jim Balsillie, the company’s chairman and co-chief executive officer. “We are particularly pleased to report higher-than-expected subscriber growth in the quarter resulting from strong execution and momentum in our carrier channels.”
Although RIM’s results helped to stimulate trading, the company’s forecast for the coming quarters was the true fire under the company’s stock. RIM said it expects revenues of $195 million to $210 million in the next quarter, with earnings per share of 30-40 cents. The company said it expects $220 million to $240 million in revenues in its first quarter of fiscal 2005, with earnings per share of 35-50 cents. The news sparked a number of analyst upgrades, including those from SG Cowen, JP Morgan and Bear Stearns.
“We are raising our rating from Equal Weight (4) to Strong Buy (1) given what we feel is a paradigm shift in RIM’s business model,” wrote investment firm ThinkEquity Partners in a research note. “Despite entering competition, RIM is extending its lead in corporate and consumer data and voice, and we believe the company has hit an inflexion point that should carry it through the next several quarters.”
Others agreed.
“We view RIM as a core holding within the growth of wireless data,” wrote BMO Nesbitt Burns in a research note. The firm maintained its Outperform rating but raised its target share price.
Separately, RIM announced Sony Ericsson Mobile Communications L.P. will join Nokia Corp. and others as a BlackBerry Connect licensee. The deal will allow Sony Ericsson to build phones that can connect to RIM’s BlackBerry servers, thus Sony Ericsson phone users can have the same access to wireless e-mail that BlackBerry users do.
ThinkEquity in October said that both Sony Ericsson and Motorola Inc. had joined RIM’s BlackBerry Connect licensing program, although RIM declined to comment on the report at the time.
Sony Ericsson’s new deal with RIM is notable since Nokia recently announced it would delay the introduction of its BlackBerry-capable 6800 device in the United States, citing RIM’s ongoing patent battle with NTP. However, Nokia is selling its BlackBerry-capable 6800 outside of the United States, where such patent laws do not apply. Sony Ericsson declined to discuss the specifics of its deal with RIM, including whether it would sell BlackBerry-capable products in the United States.
