RIM Earnings to Dictate Smartphone Trends? (RIMM, AAPL, PALM)

Research in Motion Ltd. (NASDAQ: RIMM) is set to report earnings after the close of trading today.  The maker of the BlackBerry, or ‘CrackBerry,’ has Thomson Reuters (First Call) estimates of $0.83+ EPS and $3.4 billion in revenue.  Be advised that those consensus estimates differ from other “consensus” sources.  While attention is going to be given to the formal numbers, the real interest is going to be just how much of tomorrow’s news was priced in ahead of the earnings event.

The company has already guided down expectations to around $0.83 EPS and $3.35 billion in revenue. We are looking for margins close to 40% for this last quarter and would expect some decline in margins ahead. The guidance ahead is what investors will want to key off of the most.  The estimates for the coming quarter are $0.82 EPS and $3.35 billion in revenues.

This company is getting to an interesting crossroads.  It competes against the Apple Inc. (NASDAQ: AAPL) iPhone and somewhat against the Palm Inc. (NASDAQ: PALM) Treo.  Palm’s only threat is really the launch of the Pre, but that is still going to be on a carrier-exclusive basis.  But RIMM is slowly migrating toward a subscription model rather than being tied only to new smartphone sales.  That has not yet converged, but this is part of why the stock has come so far off of its highs.  Analysts are starting to think of RIMM as a steady growth stock that has become highly established in a crowded field rather than the old hyperactive growth stock of yesteryear.

Options traders appear to be bracing for a move of at least $4.00.  Based upon what we have been seeing from RIMM, we would not at all be shocked if this stock moves much more than that based upon the news.  That is because the crowd here is so divided.  Again, that is because many are evaluating the company with much different metrics and end-games.

RIMM had not been participating massively in rallies, at least not until recent days. This one is up over 10% from just 2 or 3 days ago.   Goldman Sachs came out and said you want to own the stock going into earnings.  This was after channel checks showed shipments were running stronger than what many skeptics were calling for.  Just yesterday came a positive call from Canaccord, but earlier this week we saw BMO Securities cut the target to $52.00 and Deutsche Bank pan the stock.  Citi has also only maintained a “Hold” rating over the last week.

The company also just launched its Apps store, which will give it more “outside generated” content and features for users.  The company will likely point toward a more broader use with this being the next growth engine.

JON C. OGG