Research In Motion Pays the Price for Angering AOL
During Wednesday trading CIBC World Markets analyst Thomas Sepenzis issued a report that let some air out of the Research In Motion (RIMM) balloon.
Sepenzis reported that the company may have irked high-profile partner
AOL Time Warner
(AOL)
, a supposition that sent deflated investors whizzing from the stock. In the last hour and a half of the day, RIM dropped $3.30 for an 8% loss on more than double its average daily volume.
AOL currently sells the RIM Wireless Handhelds to customers with AOL email and instant messenger as part of a partnership announced in February 2000. Sepenzis' information indicates that AOL wants a basic version of the RIM device for $140 that it can subsidize for a final cost to customers of $99. CIBC's report alleges that RIM upped the price -- once AOL chose the Wireless Handhelds over a competitive message-capable
Motorola
device -- to $329.
RIM and AOL didn't respond Wednesday afternoon, but the fear that RIM would lose a potentially gigantic market of loyal and lucrative AOL users sent the stock reeling. Expect word out of RIM on the matter Thursday, if not from other analysts, or continued anxiety among investors if the news is not refuted.
Investor hopes soared after RIM reported on April 11 that revenue for its fourth quarter that ended Feb. 28 was unexpectedly high due to extra sales to AOL. RIM's reported $90.1 million in revenue vaulted over the Street's $74.3 million hopes -- and the company was quick to add that similar AOL gains weren't a sure thing in the following quarter, guiding the Street to expect $75 million to $80 million in first-quarter revenue. From its earnings announcement to Tuesday's close, the company's stock rose 73%, from $21.93 to $38. CIBC World Markets has done banking for RIM in the past three years.