Q4 Earnings Preview: Research in Motion (RIMM)

Research in Motion (NASDAQ: RIMM) is expected to report their fourth quarter results Wednesday, March 31, 2010...the last day of March. Shares are trading down 2% ahead of the report tomorrow after the market closes.

Last quarter, Research in Motion ("RIMM") reported EPS of $1.10, $0.06 better than estimates. Revs were also strong at $3.9 billion. For Q408, RIMM posted an EPS of $0.90, again topping by 6 cents, and revs were $3.46 billion.

The Street consensus EPS is $1.28 and $4.30 billion in revs. The EPS is a 16% premium over Q309, and 48% increase over Q408. The Street is confident.

Data from Bloomberg shows that 34 analysts have a Buy rating on the stock, 16 have a Hold, and 4 recommend to Sell. The Street average price target is $90.49, with the high at $120, and a low of $52.

RIMM shares have gained 22% through the fourth quarter, and 66.4% through 2009. Shares are currently up 113% from a low of $35.05 on March 9, 2009, and also up 9.5% YTD.

The industry has been doing fairly well through the quarter, as many of RIMMs competitors have beaten estimates, raised dividends, bought back shares, and given positive sentiment. The only laggard so far
is Palm (NASDAQ: PALM), which reported disappointing results and gave a sour outlook. Apple (NASDAQ: AAPL) beat by posting a $3.67 EPS, but noted that they changed their accounting rules. Palm posted an adjusted Q3 loss of $0.61, which was wider than views. Palm also shipped less than was expected, though they did beat their own previously lowered guidance. Nokia (NYSE: NOK) reported an increased profit on less revenue due to increased smart phone sales and cost cutting.

News Through Q4
Immediately into the quarter, RIMM faced a lawsuit from a Nebraska company alleging that RIMM infringed on a few of their patents. No verdict on the case has been reached yet.

RIMM inked a deal in early December to sell their Blackberry devices in China via IT company, Digital China.

Apple analyst Gene Munster made comments in mid-December that other companies haven't closed the gap on Apple quite yet, and that RIMM needs to go back to the drawing board.

RIMM's Blackberry had some trouble in December as well, as the network had trouble with E-mail. Instances occurred twice within a seven-day period where e-mail's were delayed.

Google (NASDAQ: GOOG) then announced their Nexus One phone in January, adding yet one more level of competition for RIMM. The Nexus One is manufactured by HTC.

Eastman Kodak (NYSE: EK) filed a patent infringement suit against Apple and RIMM regarding Kodak's digital imaging technology.

An analyst made comments that RIMM's new browser will be a "game changer." The analyst, from Canaccord Adams, said that the browser is "is a full rendering engine with incredible speed, sub three second download speeds for the most media-intensive of websites, while retaining significant bandwidth advantages over any other device or browser on the market." Click here to read more from the Canaccord analyst.

Rumor's of a takeover by Microsoft (NASDAQ: MSFT) circulated in early-February after an All Things Digital ("http://www.allthingsd.com") article made comments that Microsoft should just give up trying to make a mobile web browser and try to acquire RIMM, or another player. Click here for more excerpts from that article.

Amazon.com (NASDAQ: AMZN) launched a version of their Kindle eReader for Blackberry devices in late February. The download is free, and allows Blackberry devices the ability to download Kindle formatted documents. In reality, this is probably a better deal for Amazon, but any sort of business relationship with the retail giant is always a plus.

Notable Analyst Rating Changes Through the Quarter In December, Kaufman Bros. reiterated a Buy rating, with a price target of $93.

RBC Capital maintained on Outperform rating on the stock, while lowering their price target to $120 from $150. The change at the time, early December, was still a 86% premium to the trading price.

Standpoint Research initiated RIMM at Hold and saw limited upside.

UBS placed the stock on its Least Preferred List near the end of December.

Early January saw Morgan Stanley upgrade to Overweight, with a $90 price target. Click Here for more color on that upgrade.

Hapoalim started RIMM with a Buy rating and $100 price target. They think that the Street is underestimating the growth potential in smartphones.

Credit Suisse currently has RIMM on its Focus List, rating the stock Outperform with a $95 price target.

Broadpoint.AmTech maintains a Buy rating, with a price target of $80. They see their recurring revenue model as underappreciated. Additionally, the firm thinks that RIMM should be able to meet its targets for new territories with their current product lineup.

Finally, in February, Stifel Nicolaus started RIMM with a Buy rating.

Looking AheadApple is said to be working on a CDMA iPhone for use on Verizon Wireless' (NYSE: VZ) network. The implications for RIMM as this deal unfolds may be negative for RIMM, as users may want to switch to the app-friendly technological icon.

RIMM will combat this with the new WebKit-based browser that they're expected to launch in June for their BlackBerry devices. Some analysts believe that this is not enough, and that RIMM's market share will fall from 49% to 43% Y/Y, as competition from Google, Nokia, and Motorola shifts into a new gear. Additionally, Sprint recently launched the world's first 4G phone, the HTC EVO, which looks and acts similar to the iPhone, but with greater speed.

Keep your eye on RIM, as the smartphone wars are heating up!

Research in Motion, Inc. is expected to release their earnings for Q409 on Wednesday, March 31, 2010, at 4:00pm (EDT). Stay tuned to Streetinsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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