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Technology Stocks : Research In Motion TSE RIM Nasdaq RIMM -- Ignore unavailable to you. Want to Upgrade?

To: Glenn Petersen who wrote (785)	12/19/2000 6:25:57 PM
From: Glenn Petersen	Read Replies (1) \| Respond to of 989

From Red Herring.com: redherring.com Stocks to watch: give Blackberry a raspberry By Paul R. LaMonica Redherring.com, December 19, 2000 Research in Motion Nasdaq: RIMM Cool gadget, ridiculous valuation. Some people never learn, do they? After watching the Wall Street hype machine pump up and subsequently deflate bubbles in the stocks of Web community, e-finance, e-commerce, business-to-business, and Linux companies (just to name a few technology fads) over the last two years, you would have thought that investors would get wise to this game. Guess again. The latest investing mania is taking place in the stocks of makers of personal digital assistants (PDAs) and other "cool" wireless gadgets. Handspring (Nasdaq: HAND) and Palm (Nasdaq: PALM) have benefited from this trend, but one stock in particular that looks absurdly overvalued is Research in Motion (Nasdaq: RIMM), the Canadian manufacturer of the popular Blackberry wireless email device. Revenue growth has been explosive for the company: sales increased 57 percent sequentially in its latest quarter. And Jason Tsai, vice president of research with C.E. Unterburg Towbin, thinks a distribution partnership the company has with America Online (NYSE: AOL) will expand Research in Motion's customer base. Under the partnership, AOL will sell a version of the Blackberry with AOL instant messaging capability. Mr. Tsai admits that the stock has gotten ahead of itself, but he maintains a Strong Buy rating on it nonetheless, because he thinks the fundamentals are intact. But here's what worries us. Research in Motion was a profitable company in fiscal 1999 and 2000 but has decided to dump a lot of money into advertising in an attempt to boost its market share. Now the company is expected simply to break even in fiscal 2001 after earning 15 cents a share in fiscal 2000. The brand-building campaign is probably needed because the Blackberry, no matter how many Wall Street traders swear by it, is still kind of like RC Cola to Palm's Coke and Handspring's Pepsi. Research in Motion had sales of $119 million over the last 12 months, compared to $1.3 billion for Palm and $173 million for Handspring. Because Research in Motion will probably have to continue spending aggressively to catch these two, it is tough to recommend the stock. In our opinion, Research in Motion is trading at unsustainably high levels -- 358 times 2002 earnings estimates and 34 times 2001 revenue estimates. The fact that the company is not even a market leader makes its valuation all the more preposterous. Palm trades at about 12 times fiscal 2001 revenue estimates, and Handspring sports a multiple of 15 times estimated fiscal 2001 sales. Not that any of these stocks are cheap, but a company in third place trading at such a premium to its larger rivals is a bit odd, to say the least.

To: Glenn Petersen who wrote (785)	12/27/2000 1:14:01 PM
From: JP	Read Replies (1) \| Respond to of 989

Excerpt from Palm press release... "For next year, Palm is promising improvements to the operating system that will allow instant messaging as well as the always-on access to corporate email accounts now offered by the BlackBerry pager from rival Research in Motion. Those features will come packed in a new handheld that can deliver the wireless capabilities of a Palm VII and the smaller size of a Palm V". Anyone who truly understands the technology market realizes that this is the 1st step of the commoditization of RIMM's products -- including their monthly service revenue (which makes up a very large portion of their total sales). This company is no way worth 5+ billion dollars (forward looking or not). A fair value would be somewhere along 5 times revenues at best. I rarely short a stock but, for reasons stated above, I have chosen to short RIMM as a hedge against my long positions. Good luck to all. JP