RIM Roars Into the Abyss

Shares surge, but not everyone is sounding the all-clear signal.
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Investors cheered

Research in Motion's

(RIMM)

refound mojo, but not everyone was sounding the all-clear signal Friday.

The

BlackBerry

maker nailed its lowered targets Thursday and spoke glowingly about consumer demand saying its "new products are being adopted at an even faster pace than we expected."

This observation from a key player doesn't hurt the notion that smartphones are alive and well amid a nasty recession. So dazzled by its current order rate, RIM called for a 21% sequential increase in sales for the quarter ending in February.

RIM shares jumped $3.13, or 8%, to $41.57 in midday trading. The rally comes after a bruising six-month selloff of RIM shares, which are down 72% from a June high of $148.

But after disappointing twice this year on its financial forecasting, RIM's credibility is in question. And if anything, the prediction that current quarter margins will come in around 40%, down from 45% in the most recent quarter, suggests that high costs aren't exactly a good thing when competition is driving down prices.

"They are guiding up 20% in the teeth of a consumer spending collapse," says one New York money manager who has chosen to watch RIM from the sidelines.

As new phones like the

touchscreen Storm

and the Pearl Flip BlackBerry move RIM further into the mass market and outside its lucrative business email niche, the company, as long predicted, has made itself more vulnerable to the whims of consumers.

Reiterating his sell rating on RIM, Deutsche Bank analyst Brian Modoff points out that if it wants to be a hardware company, it should be valued as hardware company. Think less like

Apple

(AAPL) - Get Report

, which has a strong following for its software development, but more like

Dell

(DELL) - Get Report

or

Motorola

(MOT)

, two shops that rose and fell on the strength of devices.

"The company appears to have taxed its margins and their ability to launch new products with four new devices this year," Modoff writes about RIM. "We do not think this pressure will let up and see further downside to their revenue and earnings in coming quarters."