Research In Motion Puts Up a Fight


There's nothing more gratifying than a company priced for death showing that it still has some fight left in it -- especially if one has been saying that for nearly a year. I hate to boast (I don't, really), but I've been saying this for a while now: Don't count out Research In Motion (NAS: RIMM) . The beleaguered tech company is still a long way from its former greatness, and realistically it may never return to those levels, but the company's most recent quarter proves for the first time in a long time that this is one team that isn't about to hang up its Canadian hat.

Big report
Research In Motion ain't done yet, folks, I am pleased to say. Despite the endless stream of hate coming from analysts, pundits, investors, and me when I owned a BlackBerry Storm, the company proved this week that it can make things work ... better.

For the second quarter, Research In Motion crushed analyst estimates. I use the term loosely, as the company just lost less than everyone thought it would. Revenues were $2.87 billion -- more than a 30% drop from the prior year's number. Analysts were expecting something closer to a 40% drop, though, so this is actually good news. The company beat expectations by a solid 15%. Excluding a one-time restructuring charge, the company lost only around $0.27 per share, whereas analysts were expecting something closer to a loss of $0.46 -- another strong beat for RIM.

The balance sheet is actually getting stronger for the company, with an increase in its already impressive cash pile to $2.34 billion. That translates to about $4.50 per share in cash alone. On Sept. 24, one could have picked up RIM's stock for around $6.30 per share, leaving less than $2 per share for the rest of the business. The stock rose as much as 10% in Friday's trading before closing up 5%. Doesn't sound like such a bad investment, now, does it?

Realistically ...
I'm stretching the strength of Research In Motion because I like the company and have put forth a bull argument to many a bear, often ending in my getting laughed at. In the real world, though, Research In Motion still has a steep uphill battle. Competition from Apple's (NAS: AAPL) iPhone 5 and Google's (NAS: GOOG) Android isn't going to get any weaker -- the opposite, in fact. I will say that with Apple's recent flub and some highly critical remarks coming out regarding the latest iteration of the iPhone, there is an opportunity for other companies to present alternatives to once-loyal Apple customers.

RIM's BlackBerry 10 OS and new line of phones should yield some nice numbers next year. For the rest of this year, unfortunately, one can expect losses across the board. My strongest point for the bull case on RIM is still its new board member, Prem Watsa. The man behind Fairfax Financial (NASDAQOTH: FRFHF.PK) is an incredibly conservative investor and has had nothing but positive things to say about Research In Motion as a long-term investment. He has been emphatic time and time again that this is a long, long-term play -- five years or more. Why investors and analysts want to see a quick turnaround, I have no idea -- it just isn't in the cards. But the Canadian Warren Buffett (as Watsa is known) owns 10% of RIM now and shows no signs of dumping his stake. He believes in Thorsten Heins, and I believe in Prem.

It's always easy to make a bullish call after your stock rises 10% in a day, but I will anyway.

Research In Motion is a turnaround story that will reward patient investors with a tolerance for volatility and risk. Even with the company's strong rise in stock price today, it still trades only $3 per share above its cash pile and is priced for eternal stock coma. The stock deserves bulls, and those bulls will be richly rewarded before the end of the decade -- I am sure of it.

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