Marcial: Two Thumbs Up for RIM

Research In Motion (RIMM) is getting a lot of static, and its stock is under siege. That, to me, represents a golden opportunity.

Shares of the maker of the ubiquitous BlackBerry, a wireless e-mail and phone device, have been in a funk since June 25, when it posted its first-quarter results. The stock has tumbled from $142 on June 25 to $115 on July 3. But if you know the company—or have studied the historical behavior of its stock—you would be buying shares at these depressed levels.

So why is the stock reeling? It has gotten entangled in the market's bearish web, for sure, and it's been ensnared by Wall Street's intricate and puzzling ways of sizing up a stock. Often, the Street is tough to please.

Here's what happened. On June 25, RIM posted record first-quarter results that many companies would kill for in these times of economic hardship. Revenues streaked up 107%, to $2.24 billion, and profits soared 115%, to 84 a share. But they weren't large enough to impress the Street: The consensus analysts' estimates projected revenues of $2.27 billion and per-share earnings of 85—a penny more. The company attributed the lower-than-expected results to increased R&D and operating spending to position the company for future growth, and in anticipation of fiercer competition, mainly from Apple's (AAPL) revolutionary iPhone.

To an objective observer, the gap between the actual results and forecasts would seem insignificant. But on Wall Street, a penny can spell the difference between a big advance or scary drop in a stock's price. So the day after RIM posted those "disappointing" results, the stock sank.

Were the analysts' forecasts overly optimistic, or did the company simply stumble?

Picks Itself Up, Dusts Itself Off

First let's get a handle on RIM and its stock. RIM has come under siege so many times for a variety of reasons since 1999, when the stock started trading at a split-adjusted $1 a share. Each time the stock catches its breath and moves higher, some unfavorable news or event kicks it down. But each time that happens, the stock manages to pick itself up and move to higher levels. By the end of 1999, it had bumped up to 10.

But that was just the beginning of the ups and downs, and for the faint of heart, the stock delivered some scary moves. But for investors willing to brave the volatility, the rewards were bountiful: The stock hit 133 by November 2007. Before reaching that peak, however, RIM went through some trying times and hair-raising events, including a lawsuit claiming the company's BlackBerry was based on a patent owned by an outfit called NTP.

That claim rocked RIM's stock because if NTP won the patent litigation, RIM would have lost its entire No. 1 product. RIM settled the case by paying NTP $612.5 million.

I mention all these things to point out that RIM has been through the mill of traumatic, challenging events and come out each time stronger than ever, with the stock forging ahead. This time around, the setback from its "disappointing" first-quarter earnings shouldn't be too devastating. That's because management is highly focused on coming up with new products that will rival, if not best, the competition. RIM's top people are as tenacious, innovative, and forward-looking as Apple's smart and visionary team. RIM aims to battle with Apple on a product-by-product basis, if need be.

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