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Technology Stocks : Research In Motion TSE RIM Nasdaq RIMM

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To: John A. Stoops who wrote (879)	3/4/2006 12:21:26 PM
From: Sam Citron	of 989

JP Morgan has had a neutral rating on RIMM since 1.13.04 at a split-adjusted price of $38.79. I wonder if it's time for them to upgrade to over-weight. Analyst Paul Coster's most recent report on RIMM entitled RIM's Olympian Obstacle Course dated 2.24.06 noted: A one-time settlement of $0.5-$1.0 billion should be favorable for RIMM stock holders, near-term. Our DCF model scenario (see below) points to a potential fair value of $90 p/sh, assuming a $500mm pay-out in F1Q06, a 14.3% WACC* and FCF perpetuity growth of 10%, post 2012. Remember also that the March '05 "settlement" agreement resulted in a 30% expansion of RIMM's P/E multiple at that time. [WACC= weighted average cost of capital] I wish he had run a sensitivity analysis on the settlement amount instead of merely DCF sensitivity to WACC and FCF perpetuity growth assumptions, but I assume it's just not that sensitive to the settlement amount in the long run. With a settlement of $622mm, I suppose we are pretty close to his FV estimate, so I'm not expecting miracles. Sam

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