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Should You Invest In Research In Motion Limited (Nasdaq:RIMM)

 June 22, 2011 12:15 PM

Yesterday, Research In Motion's (RIMM) share price closed at $28.55, up $2.66, or 10.27 percent, over previous day's price after touching an intraday peak of $28.58. Its 52-week price ranges from $25.82 to $70.54. However, analysts consensus one year target price is at $35.5.

Comparison with competitors, and industry trends

Research In Motion, best known for its BlackBerry wireless e-mail device, is one of the leading designers, manufacturers and marketers of innovative wireless solutions for the worldwide mobile communications market. Introduced in 1999, BlackBerry has found popularity primarily in the enterprise market (large corporations and government institutions), but has recently had success penetrating the consumer market. Even in calendar year 2010, BlackBerry was the No. 1 selling smartphone brand in a number of markets around the world including the United States, Canada, Latin America, and the United Kingdom.

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RIMM's primary revenue stream is generated by the BlackBerry wireless solution, which includes sales of BlackBerry wireless devices, software, and services. BlackBerry handheld units accounted for 81 percent of total revenue in the fourth quarter of FY 11 (Feb.), flat with the preceding quarter on solid unit growth. RIMM's service revenues contributed 16 percent in the third quarter, up from 15 percent in the third quarter. Other software, OEM, accessories and other revenue accounted for 3 percent, flat with the third quarter. Handheld sales were the driver in FY 11, but handsets and tablets could lead the way in FY 12, due to new devices, an updated 6.1 Blackberry OS later this year and the introduction of tablets in early FY 12.

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In the wireless data communications access market, the company competes with a number of suppliers of access devices for public wireless data networks, including Apple Inc., Dell Inc., LM Ericsson, Garmin Ltd, Google Inc., Nokia Corp., Hewlett-Packard Development Co. and others. In addition, RIMM faces competition from companies focused on providing middleware to facilitate end-to-end wireless messaging solutions such as IBM Corp., Microsoft Corp., Notify Technology Corp., Openwave Systems Inc., Seven Networks Inc., Sybase Inc. and Good Technologies, among others.

The market for wireless solutions that support data services is in a faster growth stage compared with the broader wireless voice market. Overall growth in the traditional phone market has been in the low double digits for the past five years, while the combined annual growth rate of the smartphone market in the US over the same period was 58 percent. This is a segment that RIMM's handsets target, and it had a roughly 38 percent share in the first quarter of 2010, according to market research firm IDC.

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