RIMM ($10.50-$14) Cap=$1Bil Stk Moves Up 35% , Analysts Cautious
siliconinvestor.com
While Wednesday's rally is a welcome relief for Research In Motion Ltd. (RIMM) shareholders - the stock is down 50% this year - analysts remained cautious.
Research In Motion has signed numerous supply agreements with carriers in North America, Europe and Asia, but whether subscribers will embrace BlackBerry, particularly in view of the IT spending slowdown, remains an open question.
Goldman Sachs analyst Rajiv Das said in a research note that he spoke with nine of 11 carriers in the U.S., Europe and Asia that plan to sell BlackBerry. None are willing to commit to large subscriber growth numbers in the near term, he said.
Despite this lack of conviction, Research In Motion's guidance implies a second-half growth rate of 35-50%, Das said. "These are daunting goals when you consider that revenues are down (year-on-year) by 27% in the February 2002 quarter, 7% in the May 2002 quarter and are expected to be down 5% in the August 2002 quarter," he said.
Das is forecasting revenue of $340 million and a loss of 61 cents a share.
UBS Warburg Michael Urlocker was also cautious. He adjusted his 2003 forecasts in light of Research In Motion's new guidance and now sees a loss of 60 cents a share on revenue of $349 million. He had been projecting a loss of 42 cents on revenue of $345 million.
The wider loss projection reflects higher cost estimates, Urlocker said in a research note. "We believe there is still downside to both our figures and guidance based on weaker-than-expected upgrades to new GSM/GPRS BlackBerry devices, as well as slower-than-expected rollout of BlackBerry devices in Europe and Asia," Urlocker said.
In an interview with Dow Jones late Tuesday, Research In Motion chairman and co-chief executive Jim Balsillie acknowledged the tough business climate. "Sure it's a tough environment, but we think it plays to our strengths," he said, noting that BlackBerry offers a high return on investment.
Balsillie also said that carriers have spent billions on network infrastructure and need to offer services like BlackBerry to boost revenues. "We're the kind of revenue application that they want and need to show for all their new networks," he said. "We think we sort of fit in that sweet spot of value to the market."
-Stuart Weinberg, Dow Jones Newswires; 416-306-2026;
stuart.weinberg@dowjones.com |
