RIMM Summary: Still Liking the Big Picture

To see Jordan Kahn's preview of the Research In Motion conference call, click here.

Research In Motion (RIMM - commentary - Trade Now) reported a mixed quarter in terms of both results and guidance. EPS came in 3 cents ahead, which wasn't bad, but revenue was light at $3.53 billion. Gross margins were solid at 44.1%, ASPs were in line at $345, and new subscribers and handsets were a touch light at 3.8 million and 8.3 million, respectively.

Guidance was also a bit of a mixed bag. EPS for next quarter is forecast in the range of $1.00 to $1.08 (vs. $1.05 consensus), and revenue is projected to be in the range of $3.6 billion to $3.85 billion (vs. $3.92 billion consensus). I believe the double whammy of missing top-line estimates this quarter and then issuing revenue guidance below Street estimates is what is hitting the stock in after-hours trading. Traders seemed primed to sell the stock on anything but a blowout quarter, so this news has given them ample reason to sell, and probably reason for the shorts to pile on.

However, there were some solid aspects to guidance as well. Gross margins are forecast to be strong again at 43%, and total handsets shipped are forecast to be 9.2 million to 9.9 million, nicely higher than current Street estimates (which are around 9.30). Also, while ASPs are expected to come down, the CEO made the point that the higher ASP products that are launching next quarter aren't scheduled to ship until later in the quarter, and that will make ASPs look a little low on paper, due to the mix.

The CEO was also quick to point out to the analysts who were focusing on ASPs not to lose focus of the big picture. Smartphones are going "mainstream," he said, and the company is focusing on the "land grab." What I inferred from this was that the big picture is that there is a huge pie out there to take advantage of, and they want to get their share. So they will continue to roll out smartphones at the low, medium and high ends of the spectrum in order to grab as much share as possible.

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At time of publication, Kahn was long RIMM.

Jordan Kahn, CFA, is a portfolio manager with Beverly Investment Advisors, a Beverly Hills, Calif., money manager. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Kahn appreciates your feedback; click here to send him an email.