$612M Poorer, Blackberry Moves On
What would Wall Street be without legal battles, right?De facto standard for enterprise wireless data services Research in Motion (RIMM) had a boulder lifted off its back late Friday after rival NTP decided to settle and walk away with $612M for a patent dispute.
Investors are living la vida loca in after hours trading: RIMM shares zoomed as high as 20%.
The media's had a field day for the last 3 months, citing litigation payments as high as $1.5B and insinuating a shutdown of the ubiquitous service.
But now we know that Blackberry's free to play in the marketplace. Although RIMM also reported on Friday preliminary 4Q earnings and sales that were significantly below the operator's previous estimates, we'd be buyers of Research in Motion at an attractive enough valuation.
Blackberry has 70% percent market share in the hand-held e-mail device category. A proprietary platform and first mover advantage best characterize the firm's prowess, in our opinion. Best of all -- Blackberry only has 4M subscribers, so there's ample room for the firm to grow. Even after the NTP settlement, RIMM's balance sheet will remain rock solid, with approximately $1B in cash.
We expect RIMM to add roughly 2.5M subscribers in F2006 -- conservatively speaking -- and margins to remain respectable. At the right price, RIMM's a stock to own. Expect Monday's reaction to today's events (one has to wonder whether or not they were orchestrated) to be anything but dull.
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