RIM, Palm – A Tale of Two Smartphone Stocks

by Jim Woods | December 18, 2009 6:46 am

After the closing bell on Thursday, Dec. 17, we got earnings news from two of the major players in the smartphone space — Research In Motion (RIMM[1]) and Palm (PALM[2]).  And while the numbers were fantastic for RIM, makers of the iconic BlackBerry, the numbers were rather discomforting for Palm.

RIM said it earned $628.4 million, or $1.10 per share, on revenue of $3.92 billion in the quarter ended Nov. 30. This was a huge improvement over the same period a year ago, and much better than the $1.04 per share on revenue of $3.78 billion Wall Street was expecting. But the real positive for RIM can be found within its earnings statement.

Here we find that RIM shipped 10.1 million smartphone units during the quarter, with the total number of net new subscribers coming in at a huge 4.4 million. Analysts who follow the smartphone space were only expecting the net new subs number to come in at 4.1 million and shipments of 9.5 million.

The Palm Pre is the Ultimate iPhone Killer?[3]

As you might expect with such blowout results, RIM shares surged over 12% in after-hours trade. I expect the stock to continue gaining momentum as the results of the news are digested. So, if you own RIM shares here, hang on to them. And if you are contemplating a new buy in RIMM, this report should give you the green light to enter into the stock. Just be sure you have a stop loss in place to protect yourself against any substantial pullback in the shares.

As for Palm, well, they had a much-less-ebullient earnings report. The company reported a net loss of $85.4 million, or 54 cents per share, for the quarter ended Nov. 30. The numbers were far better when compared to a loss of $508.2 million, or $4.64 per share, in the same quarter a year ago. Analysts were expecting the company to report a loss of 32 cents per share on revenue of $266.2 million. 

As you also might expect after this kind of earnings report, Palm shares sold off sharply in after-hours trade. I suspect that Palm shares will continue trading lower through the holidays, so if you have a profit in the shares here, you might want to think about protecting your gains.

Finally, I wish I could say I didn’t warn you about Palm, but back in September I told you that Palm shares could be “dead money”[4] due to the fact that the company would have to sell a whole lot of its new Pre smartphone and other units before it could climb back into the profit zone. In fact, the shares are down over 20% since this warning on Palm was published.

So, what did the company have to say about sales of its smartphones? According to Palm’s report, the company shipped 783,000 units during the quarter, a number down 5% from the first quarter. Moreover, the number of phones actually sold in the quarter slid to 573,000. These numbers are not good at all, and they compel me to reiterate my position that Palm shares will likely continue being dead money as we head into 2010.

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Endnotes:
  1. RIMM: http://studio-5.financialcontent.com/investplace/quote?Symbol=rimm
  2. PALM: http://studio-5.financialcontent.com/investplace/quote?Symbol=palm
  3. The Palm Pre is the Ultimate iPhone Killer?: http://www.optionszone.com/market-commentary/market-analysis/2009/12/biggest-wall-street-lies-part12.html
  4. Palm shares could be “dead money”: http://investorplace.com/experts/jim_woods/palm-earnings-first-quarter-2010.html
  5. Is Microsoft the Next AOL?: http://investorplace.com/experts/louis_navellier/articles/is-microsoft-the-next-aol.html
  6. 5 Reasons to Buy Pepsi Stock: http://investorplace.com/experts/james_dlugosch/articles/gallery/best-stock-picks-pepsi-stock.html
  7. Investors Not Biting on Apple (AAPL): http://investorplace.com/experts/douglas_mcintyre/articles/investors-not-biting-on-aapl-stock.html
  8. Resolve to Buy These Bargain Stocks – 5 Picks Under $5: http://investorplace.com/experts/louis_navellier/articles/bargain-stocks-swhc-kopn-artg-synm-elgx.html
  9. top five picks for 2010: http://investorplace.com/order/?sid=XH3252
  10. download your FREE copy here: http://investorplace.com/order/?sid=XH3252

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