RIM stock flies on earnings, Palm posts 43% drop in profit

BlackBerry maker Research in Motion Ltd. saw its stock jump more than 20% in early trading after it reported a 76.5% increase in revenue from the same quarter a year ago. Meanwhile, smartphone rival Palm Inc.’s stock is down nearly 4% after it reported a 43% drop in profit from the year-ago quarter all the while experiencing cost increases.
RIM also adjusted its forecasts for the coming quarter, predicting it would add between 1.325 million and 1.375 million subscribers. It added 1.2 million subscribers in the latest quarter.
RIM’s stock was nearly breaching the $200 mark after the news, while Palm’s stock dropped to $15.99.
RIM reported $1.082 billion in revenues for the quarter, signaling a 73% increase in earnings at $223.2 million compared with $128.8 million for the same period last year. Palm reported $401.3 million in revenues, bringing in $15.4 million in profits.
RIM also announced a 3-for-1 stock split effective Aug. 20, which will be payable as a stock dividend to holders on Aug. 17.
“Clearly, we didn’t appreciate how much momentum RIM could build in the first quarter and missed the call,” wrote Ittai Kidron and George Iwanyc of CIBC World Markets Corp. “We were too cautious in our previous estimates and are adjusting estimates significantly upward.”
While Maynard Um of UBS Equity Research, Wireless Equipment, believes much of RIM’s success is due to its newest products, Um predicts Palm’s future will rest on products yet to come. “We believe new products will be key to driving earnings acceleration,” Um wrote. “While cost cutting should help stay some pressure on margins near term, longer-term margins will be dependent upon the success/failure of new products.”