The Company:

Research In Motion Ltd is BlackBerry, which is a very popular wireless e-mail system.

After a phenomenal start in their digital communications business, RIM encountered numerous patent-related lawsuits, so I started calling this company "Research In Motionless". Nevertheless, BlackBerry is widely referred to as "CrackBerry" because customers are addicted to wireless e-mail.

How addicted? For a time, because of the lawsuits, Washington VIP's were fearful a federal judge was going to turn off their system. So, Congress was ready to enact legislation to keep it on. For a captive audience, it doesn't get any better than that.

The original plan of this young Waterloo Ontario company was to provide enterprise customers in corporations and government with a secure, end-to-end, industrial-strength mobile solution for access to corporate e-mail, the web and traditional PDA functions. Now it's into messaging and cell-phones in the broader consumer space.

Today, the company has about 1,800 employees, and 6.2 million customers (Aug 2006). That's just the beginning. By 2010, they'll have in excess of 12 million customers.

Trend in the marketplace:

If communications can be digital and wireless, people want it and Research In Motion will find a way to deliver it. That's because the company's product, ie, platform, is all about integration, so it's simple for them to build in additional new applications for mobile people as market trends develop. If enough of us want it, they'll provide it.

With cell-phone capabilities added to the standard BlackBerry functionality, Pearl will soon become the integrated product we want and need.

But then, it's always been that way since the company brought out their first BlackBerry. It's just getting better.

Catalyst that has driven the company:

Research In Motion differs from its competition because its founders understood the need and desire of people for simplicity and reliability. So they had real people help them with the initial design, and then they made the strategically critical decision to architect, produce and manage all aspects of the service, including hardware, software, and Internet servers. They left nothing to chance.

What they built was an integrated platform, not a device. Total control.

Results in the marketplace:

Revenue-wise, they are shooting the lights out. Defining the essence of a growth company, RIM revenues are exploding. Using actual data for 2005 and Merrill Lynch estimates for 2006-2009, sales (in billions) are: $1.350, $2.070, $2.940, $3.900 and $4.700. Net income figures (in millions) are: $414, $482, $631, $793 and $970.

With 56-pct gross margin, and 27-pct operating margin, that still leaves plenty (about 8-pct) to be plowed back into research and development, plus enough left over to pay down all debt " yes they have only a small amount of current liabilities -- and to buy back plenty of stock.

They bought back 3.2 million shares this quarter. And, there are just 190 million shares out. By 2010, I figure, using Wall Street estimates, they'll have some $2.6 billion in cash in the bank, which is about $14 a share. I now refer to the company as Cash In Motion.

Unfair advantage:

The latest product called Pearl, which adds cell-phone capabilities, is going to be a hit in the consumer space, which compared to the enterprise market, multiplies the company's marketing reach by a factor of four.

Major partners include Rogers Wireless, AT&T Wireless, Cingular, VoiceStream, BT Cellnet/mm02 and Telecom Italia Mobile. More to come. As Research In Motion rolls out the latest technology, these are the companies that will do the heavy lifting in putting the product into the customer's hands all over the world.

Based on form and function, sales of the recently announced Pearl are already blowing away original estimates. In addition to being a cell-phone, Pearl will come with a whole range of special features, including full qwerty keyboard. All things considered, the competition cannot hold a candle to RIM.

Business competitors and their investment bankers can only look on with envy, and their own customers with pure satisfaction. Television will undoubtedly be the next enhancement.

Opinion on the stock:

Based on my earnings estimate of $5.00 for calendar year 2008, and a PE multiple of 30, I have a 12-month price target of $150. The stock is presently $113.84.

But sometime soon, I anticipate a broad-based Bear market that will also take down tech stocks. RIMM could fall back to $75 (mid-August level). If so, I'd start to accumulate at that point, writing put options and buying calls.

Research In Motion Ltd [GICS 45, Cara 100]
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