Research In Motion Regains Footing

Some difference 3 months can make. Research In Motion (RIMM) stock 3 months ago was bearing the brunt of sell-off at the behest of disappointing performance and guidance, dipping from the mid $80s to the high $60s per share. The stock had mostly held water of late, sliding slightly to the low $60s but was in a position to change all that with another earnings report.

With the increasing competition from Apple's (AAPL) iPhone, Palm's (PALM) Pre and heightened marketing given to several smart-phones running Google's (GOOG) Android software RIM had to deliver, on all fronts, and it has. Blowing past all expected metrics is leading shares of RIM higher by 11% early in after hours trade.

The lines: Revenue of $3.92Billion vs $3.78Billion estimated; Income of $1.10/share vs $1.04/share estimated; Subscribers at 4.4Million vs 4.1Million estimated. RIM also shipped 10.1Million units during the quarter, including a milestone generating 75Millionth.

Seems the analyst talk of RIM's mighty fall via the dual-pronged iPhone/Android sword will have to wait for the time being as the folks from Waterloo can pop the bubbly for at least another quarter as going into the Christmas season the guidance RIM provided was very strong. Revenue of $4.3Billion vs $4.11Billion and EPS of $1.27/share vs $1.12.

So, with RIM so firmly positioned, what's wrong with the company and why isn't it a must own in the growing smart-phone industry? Two main reasons: Interfacing and Extensibility.

In interface design RIM is not even close to the same league as Apple, let alone the various flavours of Android that are appearing in the market-place. The company has such a culture entrenched in the corporate world that functionality for the consumer has always seemed like an after-thought with the current incarnations of the BlackBerry OS. This was most evident in both versions of the touch screen device Storm that the company debuted to scolding and muted critical response.

In regards to extensibility its hard to call RIM's platform a leader in any sense of the world. Its BlackBerry App World platform is another after-thought and in the days of the highly successful iPhone/iPod Touch AppStore, being an afterthought is just about being dead in the water. While Android is still nowhere near Apple's 100,000 applications catalog, it is getting there with over 16,000 available for various handsets. In this race RIM is already well-behind.

But there is a silver lining, the company makes very good looking hardware, for the most part, and is a staple in the corporate world, which is a business that isn't going anywhere and will grow with the rise of smart-phones world wise. Prospects continue to look good, and if the engineers can get their software act together for a new version of the BlackBerry OS, it really can be a 3 pronged fight in the mobile space for the decade to come, and that kind of potential will have analysts and investors eager to jump on board.

Disclosure: Author does not hold any position in RIMM, is long AAPL, GOOG

Smartphone Wars to heat up this Summer

The new hotness, no not Twitter, but the smartphone, is gearing for an all hands on deck gadget war this year and beyond. While smartphones have been around for sometime, it was only until recently (read: iPhone) that momentum has picked up faster than Usain Bolt. With two main rivals now leading the charge, Research In Motion (RIM) and Apple (AAPL).

This isn't a 2 horse race however, nor will it be over soon. As RIM executive Jim Balsillie recently said on the company's conference call in baseball terms, the smartphone wars are somewhere in the 2nd inning. What may seem like an Apple and RIM race to win, certainly can be turned upside down with entrants from all of the world. Although smartphones account for less than a third of the phone market, they command nearly 90% of the media coverage and almost all of the growth. According to Mobile Advertising Network AdMob, smartphone share increased from 26% to 33% in the past 6 months. This growth trend seems likely to continue as popularity in these devices continue to gain and subsidies for the most popular devices reign in even the most worrisome economic consumer.

Although Nokia (NOK), may be the biggest phone maker in the world, its smartphones have yet to inspire consumer desires such as the iPhone from Apple or the Blackberry Bold from RIM. Although by sheer volume, Nokia with its range of models holds 3 of the top 5 most popular smartphones spots globally, trailing only the aforementioned iPhone. Trends are shaped by consumer decisions as well as the push from corporate entities, and as such none of these companies are standing still, nor can they afford to.

What's on the horizon then? An analyst at Barclays is reporting that Apple has doubled iPhone production in anticipation of new models coming in June (Link). Recent iPhone speculation has pointed to not one but two phone models expected out of Cupertino this time around, conveniently coinciding with the release of Mobile OS X software version 3.0 in June. When Apple reports results for the first calendar quarter of 2009 it will surely surpass 20Million unit sales for the iPhone, not too shabby in about a year an a half.

With the AppStore becoming a global phenomenon Apple is making it extremely tough for users to ever switch away from an iPhone. If you've spent hard earned money on applications to make your phone function exactly how you want it to and have the features you want, you'll of course be less tempted to switch to something else if it means losing those precious applications. When iTunes purchases only worked on iPods for all those years, it drove an upgrade cycle for the company like nothing the music industry had ever seen.

RIM, fresh off the release of a new Curve, the well-received Bold and the mixed touchscreen Storm, has had information leak out about 3 new devices codenamed Onyx, Driftwood and Magnum. This coming from a company that had shipped almost 8 million devices in its most recently announced quarterly results, sending shares higher by 20%. RIM is certainly hard at work, but its not an easy task convincing the general public the virtues of a Blackberry. Always the device of choice for the business user, as smartphones have become increasingly consumer-focused RIM had a tough balancing act to strive for. For the most part, judging by the results, RIM has done very well. Initial critical thrashing of the touchscreen Storm notwithstanding the device has been successful and further forays into iPhone touchscreen territory by RIM will likely be greatly improved. And not a soul can say negative things about the hardware RIM uses for its keyboards, they are always top-notch.

Palm (PALM) has somehow starting erasing its name from the gravestone it was surely destined to have after several quarters of significant losses. The driving force for the resurgence! A little device by the name of the Palm Pre. Wowing audiences earlier in the year with iPhone-like admiration, the Pre is set to launch in the US soon, followed by International markets later in the year. There still is much at stake for Palm, but the feedback thus far has been incredibly positive on the new device, and with the work put into Palm's WebOS platform the company, and consumers, expect a wide range of WebOS devices going forward.

Google's (GOOG) Android has had a rather slow start but will likely pick up steam in the latter parts of the year as not only a second handset from HTC, the company that produced the G1 for T-Mobile, is due as well as multiple devices from Samsung. With carriers in the US and abroad looking at, adopting, and testing Android, it seems only a matter of time before Google's vision of hundreds of Android phones becomes a reality. T-Mobile is even talking about launching Home phones and netbooks running Android, and a recent story about HP had the company confirming it will be testing Android for its netbooks. The free, open-source platform has proved resilient despite some questionable early roots, and as the platform stabilizes and is available on more handsets and in more incarnations consumers will increasingly see Google's web based products, and ads, within their mobile world.

Like Google, Micrsoft (MSFT) has only been providing software for smartphones, however all the momentum a bloated Windows Mobile has garnered in the past has seemingly been lost in the past year. With flashier devices like iPhones, Blackberrys, Androids and Pres being on consumer minds the battle remains uphill for Microsoft. A software overhaul is needed for Windows Mobile and it certainly doesn't help the company that it announced a visual overhaul (Version 6.5) but slated it for release at the end of this year, while a proper, better Windows Mobile 7 is scheduled to come sometime in 2010. Microsoft can't afford to wait much longer as Android gains momentum, and while the other most popular smartphones all run their own platforms.

All in all, consumers will have an abudance of choice in 2009 and beyond, and as their devices do more things they need, the world as we know it will change from the at-home/at-work Internet dominated era to the mobile/on-the-go Internet dominated era. The one constant is being connected and with each software platform making a better Internet experience each time around the debate surrounding Internet browsing is fading. The only way to get ahead in this game is to bring incredible new features (such as 3rd party applications) wrapped in elegant hardware that consumers feel inspired to purchase and use. While Apple and RIM are leading in that sense now, by the time this year's crop of devices are released we may just be nearing the bottom of the 4th.

Disclosure: Author owns AAPL, GOOG, owns long-term call options on MSFT

Tuesday brings in Valuation Hunters, Stocks Rise 10%

The headlines were set to spook once again: "Consumer Confidence at all-time low" (CNN). "Home prices see record plunge" (Reuters). But the bargain and valuation hunters were out and about nonetheless. When Stocks get this cheap the big-time and small-time Investors stand up and take notice.

Aluminum maker Alcoa (AA) fell to its lowest P/E ratio ever-recorded and today observed value-investors jump in cautiously in early-morning trade but emphatically as the day moved forward. Alcoa gained almost 18% on the day as both the Dow and S&P gained a full 10 percentage points.

In other good news, Boeing (BA) Investors took a deep sigh of relief as the company struck a tentative deal with its Machinist workers. A strike that, at the worst possible time, plagued the company for weeks on top of economic-driven market sell-offs. Boeing shares recovered 15% on the day.

Wireless Carriers in North America had a particularly positive rebound trading session. Verizon (VZ), up 15%, jumped for the second straight session and AT&T (T), up 13%, followed closely as Investors are taking heed of Wireless growth prospects despite economic woes. Devices like Apple's (AAPL) iPhone and RIM's (RIM) Blackberry Bold and Storm models are creating value-propositions that customers are willing to engage in. As Apple announced their quarterly results last week, headlined by almost 7Million unit sales of iPhone 3G, Carriers around the world are now beginning to see a customer set willing to spend more on combined Voice and Data plans.

In Canada, Rogers Communications (RCI.B) announced its quarterly results, which of course were headlined by iPhone sales of over 250,000 units. The battered Canadian Wireless company stock rebounded 11% on the day.

Investors, analysts and the media in particular, like to beat the doom and gloom drum on bad days and the euphoric relief drum on good days, but for those observing and waiting on the sidelines it is easy to get caught into the hype. Companies still trade on fundamentals and valuations, and while attractive valuations are observed all over the market these days I'd be much more comfortable seeing sustained positive moves over a number of days, rather than a valuation-based up day that now prices in complete expectations of a further half-point Federal Reserve Interest Rate cut.

This market will need some more positive reinforcement, so until then, as great as it feels to be euphoric about stocks again, the euphoria will have to wait for now.

Disclosure: Author owns AAPL, T, RCI.B, BA

Apple Aims for the Fences with $199 3G iPhone at WWDC

Apple's (AAPL) Annual Worldwide Developer Conference is typical fanfare for just that, Developers, but this year, all eyes were focused on the iPhone, both device and software platform. Steve Jobs took the stage with typical Jobsian fanfare and proceeded to showcase the future of the mobile development platform. Eager gadget connoisseurs, Apple fanatics and casual observers have been known to be caught up in The Steve's Aura, and while the typical WWDC is geared toward the most technically proficient computer folk, the rabid waiting for a faster iPhone had to come to a head at some point.

That time was now, as Jobs showed off a sleeker 3G+GPS iPhone that will be available in 22 Countries come July, with an additional 48 Countries seeing the device later in the year. The remarkable thing was not the expected iPhone announcement, the remarkable thing was the price. $199 for the 8GB model with a 2 year contract. It's a price point the mass market was waiting for, and should spur incredible demand for the must-have product. Apple's goal of 10Million units sold by the end of the year, seems ever closer now, and as Apple's shares dip to the $180 mark, it moves the company from "attractive valuation" closer to "is it really this cheap?" levels.

Not only is the 3G, GPS equipped iPhone coming, it is bringing with it the Application Store and open Software Development Kit. Apple showed off several applications at today's event and plenty more can be expected as the days roll off the calendar. Reporters of all shapes and sizes, in publications both big and small, are clamouring over the new "open" iPhone and the possibilities that the SDK promises, hailing the device and the platform as the next wave in computing. While customer's of iPhones and iPod Touches will undoubtedly be happy with the new selection of applications for their devices, Apple also stands to gain plenty keeping a 30% cut of all sales from the App Store. With a few games shown off today priced at $9.99 it stands to reason, the App Store will give Apple another supplemental Revenue and Profit stream.

While 3G and GPS were the two things consumers were clamouring for in the iPhone update, business users wanted the device to be secure, sync with their offices and provide full enterprise support & functionality. With the newest iPhone software, slated to be released in early July, Apple's answered the most determined business user requests. Exchange support for e-mail, calendar and contacts, various other networking protocols, and remote locking down and wiping of devices. Apple had previously outlined these features in their Roadmap event, but with the software available in a month, the time for business is now.

A Stat from the keynote: 35% of Fortune 500 have been testing the iPhone's enterprise software and SDK. That's a substantial percentage of businesses who see use and value in what Apple's device provides, and if even a fraction of this percentage produces a company wide roll out, Apple will have the clout to really compete with RIM's Blackberry on the business front.

As the "iPhone killers" roll off the assembly lines of competitors, Steve showed once again today that Apple still carries that design swagger, and holds such sway over the media, that each move is written about, rewritten about and scrutinized over till the next such Apple special event. When was the last time a phone from Samsung, LG, Nokia or Motorola was mentioned in thousands of news stories?

With today's market, the high P/E consumer sector, especially technology gadgets, is one most traders are very cautious about and with Apple sporting a Forward P/E of about 30, there has to be incredible growth to justify the price tag. Lucky for Apple holders, that growth is there, and has been proven time and again, regardless of economy. In time, those patient with the market, and Apple, will surely be rewarded, as today's iPhone announcement becomes tomorrow's iPhone worldwide roll out and at $199 to start, that's going to be a deal too incredible to pass up.

Disclosure: Author is long AAPL

Market Musings Oct 24, S&P Changes add NYX, and Facebook news

The Markets came back strong to the close on Wednesday after being down fairly significantly mid-day. News of the struggling Housing sector and brokerage house Merrill Lynch (MER) writing down over $8Billion due to the Credit Crunch rattled investors and traders. A not so earth shattering outlook from high flier Amazon (AMZN) didn't help Technology stocks either.

The economic news on Existing Home Sales hurt stocks at the start as sales fell 8% year over year, which was worse than most economists had expected. Lots of talk about this "not yet being the bottom" led to further fears and thus more selling. Stocks seemed to bottom out however mid-day and recovered to be only flat or slightly lower. Technology was hurt by Amazon's perception of next quarter margins, which had investors heading for the profit taking fence.

NYSE Euronext (NYX) was up again today, hitting a recent high of $92, before settling at $90/share at the close, on news that it is about to be inserted into the S&P 500 and S&P 100 indices. This news was confirmed earlier in the week but today marked the last trading day before the company was to be officially recognized. Shares of NYX have rallied almost 9% since the announcement. The sheer number of money managers and funds that now have to own the company will likely continue to drive the shares higher going into its earnings report in early November. The stock is still off of its $112/share 52-week high but with a strong report and continued buying demand it may be sooner rather than later that the stock breaks into that territory.

Facebook, everybody's new favourite uber-growth social network, made more headlines today with a couple major announcements by big technology companies. Research In Motion (RIMM) announced a new application for its popular BlackBerry devices that ties in with Facebook, further promoting Rim's plans to nip at the heels of the consumer market segment. Microsoft (MSFT) threw its name into the social network hat as it agreed to purchase a 1.6% stake in Facebook for $240Million. The transaction gives Microsoft better leverage against its main Internet advertising competitors; Google (GOOG) and Yahoo (YHOO), and values Facebook at a lofty $15Billion.

Disclosure: Author is long NYX, GOOG

Jobs Report puts Market in a Bullish Mood

The US Labor situation got a much needed boost last month as payrolls in September increased by 110,000. The Market feared dipping into a recession as the August report showed a decrease of 4000 jobs. This number was actually revised upwards to show a gain of 89,000 jobs. These macro-metrics put the markets in bullish territory early and the indices never looked back.

The Nasdaq led the way with a 1.7% gain and the Dow, S&P and Canadian TSX were all up between .7 and 1%. Canadian Technology power and BlackBerry maker Research In Motion (RIMM) led the way on the Canadian side as the company's strong earnings and guidance going forward lifted shares over 12%. The optimism surrounding the company and its popular line of electronics helped prop tech stocks for the entire trading session.

Investors go into the weekend on a high and as the Americans are back at it on Monday their Canadian counterparts get the day off to Celebrate the Thanksgiving Holiday.

3rd Calendar Quarter Ends, Earnings Season Begins

As a tumultuous 3rd Calendar quarter comes to a close, market volatility grabbed most of the trading headlines as the markets felt the effects of the credit crisis and a Fed induced Rate Cut Rally.

What the end of the quarter brings is wave after wave of Corporate Earnings. The markets have seen earnings from the Financials coming over the last couple of weeks, highlighted by Goldman Sachs (GS) tremendous expectations beat. The first week of October is highlighted by a couple gadget/phone makers as Palm (PALM) reports Monday and Research In Motion (RIMM) reports Thursday. The two smart phone competitors have been going in opposite directions and Palm hopes its latest cheap device can put a dent in the momentum that's been grabbed by the BlackBerry and Apple's (AAPL) iPhone.

Overall the upcoming earnings week is fairly calm as a storm of earnings will come in the last three weeks of October.

Markets up Wednesday, Dow gains 99 led by General Motors

American Markets enjoyed another positive day with the Dow Jones finishing to the plus side by 99 points. The big push was provided by General Motors (GM) as it enjoyed a 9% gain. GM and the United Auto Workers Union reached a deal to renew auto worker contracts and restructure GM obligations to workers and the union. The threat of a long-term strike was lifted from the shoulders of GM and the stock jumped accordingly.

Also enjoying positive sentiment were the Investment Banks as Bear Stearns (BSC) jumped over 7% on reports that the big man himself, Warren Buffett is eyeing a stake in the company. These reports went on to say that several big banks are also interested in purchasing as much as 20% of the company. This news had investors feeling pretty good about the potential for these companies, specifically the investment banks, to overcome the losses and the mistakes that were made during the sub-prime credit situation.

In technology stocks, momentum for Research In Motion (RIMM) kept going strong as the company continues to defy gravity and bloated P/E valuations. The rule of 80-leads-to-100 was in full effect for the BlackBerry maker as it hit a high of $100.75 before settling to close at $99/share. Apple (AAPL) this morning opened to an all-time high and continued to $155 before drifting down and closing slightly lower just under $153. The recently opened Amazon (AMZN) DRM-Free MP3 store is making its rounds and while there hasn't been much of an effect on Apple's stock yet the consensus has been that this can emerge as a true competitor to iTunes.

With the quarter coming to a close investors will be keen to be placed in the right companies as the earnings season kicks into high gear.

Disclosure: Author is long AAPL

See-saw Trading leaves Markets with a Positive Monday

North American Markets hovered around the flat line early Monday morning as Friday's Fed induced buying didn't spill over into this week. Stocks drifted lower midday but recovered to end slightly higher by the end of the day. The Dow picked up 40 points and the Nasdaq 3. Canadian markets were higher as well with the TSX faring better than its American counterparts.

Perhaps some signs of relief were seen today as home renovator Lowe's (LOW) reported good quarterly numbers sending the stock higher by 6%. With the home crisis cloud hanging over the home builders and renovating stocks investors seemed relieved that Lowe's was able to somewhat weather the storm. The financials, which led the week-end charge last week fell overall today as the major US banks were lower across the board.

Technology stocks got a boost from positive comments surrounding Research In Motion (RIMM) as the Blackberry maker prepares for its 3 for 1 stock split. This wasn't enough to cause an extended rally in technology shares as the sector was mainly flat for the day.