Milunovich at MER sitll likes RIMM
What Milunovich said yesterday:
We maintain our Accumulate/Buy rating.
Research In Motion (RIMM; $46 1/4; D-2-1-9)
> Feb00E$0.18 Lowering 01E from $0.55 to $0.40
> * RIMM reported 3Q results in line last night; EPS was $0.05 and
> revenue was $24mil. We are lowering our 4Q revenue estimate from $32mil
> to $25mil and EPS from $0.07 to $0.05. We are lowering our 01 revenue
> estimate from $236mil to $181mil and our EPS estimate from $0.55 to $0.40.
>
> * RIMM's Blackberry product, which we view as the key to the future,
> did quite well (20% of revenue). It is becoming clear to us that Dell's
> endorsement of the RIMM product is opening up corporate demand as the
> company is experiencing strong demand in the first two weeks of Dec. (it
> had expected a bit of a slowdown).
> * Bellsouth has resigned, which is good news, in our view. However,
> it will not take units until April and the new deal is more "pay as you
> go" in nature. It has a minimum of 100,000 units (positive, we believe,
> as it will give RIMM more visibility). Bellsouth is not expected to
> purchase anything in the FebQ but is expected to ramp up in AprQ.
> * It appears that Bellsouth is not doing as well as we thought. We
> think there are two problems 1) PageNet, a distributor for Bellsouth,
> appears to be having a number of problems and 2) Bellsouth is selling the
> interactive pager, not the Blackberry product, and therefore does not have
> the Microsoft exchange link.
> * It appears that Bellsouth is "stuck" around 10,000 units/month and
> that sales have stalled, which is likely why it took so long to get the
> new contract signed (Bellsouth was holding off because it had too much
> inventory). RIMM appears to have had no visibility into what Bellsouth
> was doing.
> * We think there will be an acceleration in business in the near term
> due to the Bellsouth issue, which causes us to lower our estimates, but
> long term we think the company will be about Blackberry.
> * We expect the stock to be weak on this news.
> * We still anticipate revenue growth of 150% next year. We think
> investors will become increasingly interested in this segment and believe
> that RIMM's competitive advantage should continue for the next 1-2 years.
> * We maintain our Accumulate/Buy rating.
> (S. Milunovich)
>
> |
