RESEARCH IN MOTION INC. $16 - Toronto symbol RIM

RESEARCH IN MOTION INC. $16 (Toronto symbol RIM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 524.2 million; Market cap: $8.4 billion; Price-to-sales ratio: 0.4; No dividends paid; TSINetwork Rating: Above Average; www.rim.com) has suffered several setbacks in the past few months, including a network outage in October 2011 that stopped or slowed the delivery of emails to its BlackBerry smartphone users. As well, sales of RIM’s PlayBook tablet computer have been slower than expected. That forced RIM to write down unsold inventory.

Excluding unusual items, RIM’s earnings fell 26.8% in its fiscal 2012 third quarter, which ended November 26, 2011, to $667 million, or $1.27 a share. (All amounts except share price and market cap in U.S. dollars.) A year earlier, it earned $911 million, or $1.74 a share. RIM spends 7% of its revenue on research.

Revenue fell 5.9%, to $5.2 billion from $5.5 billion. However, revenue is up 24.0% from $4.2 billion in the second quarter, thanks to the launch of new smartphones and strong sales in the U.K., France, South Africa, Mexico and Argentina. Hardware sales accounted for 79% of RIM’s revenue in the latest quarter, followed by services (19%) and software (2%).

RIM shipped 14.1 million BlackBerry smartphones in the latest quarter, up 33% from the second quarter. It also shipped 150,000 PlayBooks, down from 200,000 in the second quarter. RIM now has 75 million total users worldwide, up 35% from a year earlier.

RIM expects BlackBerry shipments to fall to between 11 million and 12 million in its fiscal 2012 fourth quarter. That’s because RIM’s customers are waiting for it to launch new models that use its new BlackBerry 10 software. These phones should be available in the second half of 2012.

The shares remain volatile but could shoot up on any positive news. For example, RIM owns thousands of patents that could make it a takeover target. Patents are important to tech firms, because they let them protect their market shares from rivals. Owning a large number of patents can also help companies fight patent-infringement lawsuits.

Even with its recent setbacks, RIM’s balance sheet remains strong. It has no debt and holds cash and investments of $1.5 billion, or $2.87 a share.

RIM is a buy for patient investors.

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