Bet on Blackberry

02/14/2003 12:00 am EST


Andrew Seybold

Editor-in-Chief, Forbes/Andrew Seybold's Wireless Outlook

"Wireless is about to play an expanding role in our lives," says Andrew Seybold, editor of the Forbes/Seybold Wireless Outlook, a definitive source of information on the wireless industry. "We will see VCRs, stereos, TVs, and speakers go wireless over the next decade. The integration of the home PC and the TV and stereo will open up new opportunities for companies large and small." Here's one wireless pick.

"Will 2003 be the year that Research in Motion (RIMM NASDAQ) rebounds? After its shares fell 72% in 2002, many analysts are still doubtful that the new year holds new promise. The company has made mistakes. Last year, it introduced a new product with software problems and a design flaw; you could use it to make phone calls but you had to attach a cumbersome ear piece. Sales were disappointing. Then, in November, a jury verdict decided that RIMM had infringed on eight patents related to the use of wireless communications in e-mail systems. All this has taken a toll on the company, as the firm announced a third quarter loss of $92 million. The stock, which traded as high as $30 last March, fell as low as $8.

"But the company is in good financial shape. It has $531 million in cash and only $11 million in debt. Gross margins were up to 46.5% and should continue to increase. In addition, the US patent office has started a re-examination of several of the patents. Meanwhile, the company has had a lot of success in signing up partners. The company released the Blackberry 6710, which does not require an ear piece, and it is now being sold by T-Mobile and AT&T Wireless. More important is a recently formed partnership with Nokia, which will incorporate the Blackberry software on future phones. All this bodes well for the stock. Growth in subscribers should boost shareholder value. In the third quarter, net subscriber adds were 60,000--much higher than the 34,000 added in the first quarter and the 48,000 added in the second. Bottom line: the stock price has already taken some of this positive news into account. The company may not show a profit for another year or so, but for the long-term investor, RIMM is a buy."

Related Articles on