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RIM Rises Sharply on Upgrade

WATERLOO, Ontario ( TheStreet) -- Research In Motion (RIMM) shares are surging following an analyst upgrade that arrived ahead of the company's fourth-quarter results.

BMO Capital Markets upgraded RIM from market perform to outperform citing improving demand. In particular, the BlackBerry Bold 9700 and the Curve 8520 are helping push RIM's revenue upwards, it said.

In response, the smartphone maker's stock climbed $3.89, or 5.60%, and closed at $73.39.

"We expect a meaningful beat and raise when the company reports on March 31," wrote Tim Long, a senior analyst at BMO, in a note. "Strength should be driven by all regions, and the 9700 and 8530 both seemed strong."

BMO's Long adds that RIM will benefit from the evolving smartphone landscape, despite stiff competition from Apple's (AAPL - Get Report) iPhone.

"Competition that we were expecting now seems further away, including a CDMA iPhone, giving RIM the ability to further grab share in the smartphone segment," he wrote. "We also expect the solid cash flow performance from the November quarter to continue."

During its recent third quarter, RIM generated approximately $1.1 billion in cash from operating activities, which was offset by a $775 million share repurchase, capital asset additions of around $196 million and intangible asset additions of approximately $143 million. Excluding the share repurchase, RIM would have generated approximately $685 million in cash during the quarter.

Despite an outdated operating system, RIM still holds the No. 2 smartphone spot, so today's upgrade from BMO Capital Markets was not totally out of the blue.

Analysts surveyed by Thomson Reuters expect RIM to earn $1.27 a share in its fourth-quarter and $1.21 a share during the following quarter. BMO, however, is significantly more bullish on RIM's prospects.

"We are 5 cents above consensus for February and 14 cents above for May," wrote Long in his note.

Wall Street expects RIM to post revenue of $4.29 billion for both its February and May quarters.

-- Reported by James Rogers in New York


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