Top Tech Stock; Research In Motion rolls through Mixed Playbook Reviews
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    Top Tech Stock – Research In Motion hopes PlayBook will Boost Market Position

    Research In Motion Limited (NASDAQ: RIMM) reversed the downward trend that the company experienced in 2010 and increased 37% during this fall. The company is currently traded at $58.66, which is below the price of $65.93 reported at the beginning of 2010. The upcoming introduction of the professional-grade BlackBerry PlayBook tablet to compete with Apple Inc.’s (NASDAQ: AAPL) iPad is backing the price recovery.

    RIMM revolutionized the mobile industry with the introduction of the BlackBerry solution in 1999. Today, BlackBerry products and services are used by millions of customers around the world to stay connected to the people and content that matter most throughout their day. As of the end of August, the company has shipped approximately 115 million smartphones and has a subscriber base of more than 50 million.

    The company’s operating results were impressive. Revenue for Q2 FY 2011, ended August 28, 2010, grew 31% to $4.6 billion compared to Q2 FY 2010. RIMM’s net income for Q2 FY 2011 stood at $797 million, or $1.46 per share diluted, compared to $476 million or $0.83 per share diluted in Q2 FY 2010. During Q2 FY 2011, the company’s smartphone shipments neared 12.1 million, and approximately 4.5 million Blackberry subscriber accounts were added.

    RIMM has also announced that for Q3 FY 2011 it expects revenue to be in the range of $5.30-$5.55 billion and diluted EPS to be in the range of $1.62-$1.70. According to Reuters Estimates, analysts on average were expecting the company to report revenue of $4.85 billion and EPS of $1.39 for Q3 FY 2011.

    Despite the solid results and outlook, RIMM is currently traded at a trailing 12 months (ttm) P/E multiple of 11.29x, compared to AAPL’s ttm P/E of 20.24x and Google Inc. (NASDAQ: GOOG) ttm P/E of 24.00x. It is all about the company’s declining share in the growing smartphone market. The competition from both AAPL and GOOG Android based phones are eating away the market share from RIMM.

    According to Nielsen’s latest Mobile Report, AAPL has nearly caught up to RIMM in the U.S. smartphone market, with 28% and 30% of installed base, respectively. While, GOOG with Android is gaining fast and has 19% of installed base. The data for Q3 of calendar 2010 indicate that out of 21 million smartphone shipments in the U.S., GOOG’s Android shipped 43.6%, AAPL was second with 26.2% and RIMM came third with 24.2%.

    The major reason of loosing market share is the vast disparity between RIMM’s BlackBerry ecosystem, which tops out at about 10,000 applications and Apple’s iOS ecosystem, which boasts over 300,000 apps. As a result, RIMM’s strategy to develop a platform that would not require applications for the Web is not paying off, with users preferring mobile platforms with a wealth of applications.

    RIMM’s announcement to introduce its PlayBook, a tablet computer that mirror’s the design and feel of Apple’s iPad, has contributed to a slight recovery in the company’s stock price. The device would be priced at less than $500 when it hits the U.S. shelves in the first few months of 2011. The company has posted a comparison video between its upcoming tablet, the PlayBook, and Apple’s iPad (running iOS 3.2.2) and commented that the PlayBook is technically superior. However, PlayBook most likely will compete against the iPad 2, which is expected to be upgraded and could wear away the apparent advantage of PlayBook.

    The research company Gartner predicted that sales of tablets could grow from 19.5 million in 2010 to 208 million in 2014. This represents a huge market to service and could provide significant upside potential for RIMM. The huge base of Blackberry users could facilitate a rapid introduction and adoption of PlayBook, thus enhancing the company’s growth potential.

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