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RIM plunges after hours
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April 11, 2000: 7:26 p.m. ET
Stock falls 15 percent after reporting no change in 4Q earnings per share
By Staff Writer David Kleinbard
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NEW YORK (CNNfn) - The stock of the Canadian wireless device company Research in Motion (RIM) plunged in after-hours trading Tuesday, after RIM reported fourth-quarter earnings per share that were flat with the same period last year.
After the Ontario-based company reported its fourth-quarter earnings, its stock dropped 10 to 72, having dropped two points in regular hours trading Tuesday. While RIM's fourth-quarter revenue rose 42 percent, its net income rose only 10 percent, and its earnings per share were unchanged.
RIM (RIMM: Research, Estimates) on Tuesday reported fourth-quarter revenue of US$25.8 million, a 42 percent increase from US$18.2 million in the same period last year. The company attributed the revenue growth to strong sales of its BlackBerry wireless e-mail system.
RIM's net income for the quarter was US$3.2 million, or 5 cents per share, compared with a net income of US$2.9 million, or 5 cents per share, in the same quarter last year. The earnings per share were even with the mean analyst expectation, according to earnings tracker First Call, but investors appear to have expected a better showing.
The company's fourth-quarter operating income plunged 35 percent to $1.9 million from $3.7 million. A 260 percent increase in investment income helped RIM compensate for the decline in its operating results.
Introduces New Device
Separately, RIM unveiled on Tuesday a handheld wireless device that will place the rapidly growing firm into competition with Palm Inc.
RIM's new device, the RIM 957, gives users wireless access to the Web and to the same e-mail that appears on their desktop computers at work. It also has paging and organizer features. As with Palm's popular hand-held devices, the RIM 957 can be synchronized with lists of contacts contained on a desktop computer.
 Powered by an Intel 386 processor, the RIM 957 has a screen, a keyboard that users operate with their thumbs, 5 MB of memory, and an embedded wireless modem. The device costs $500, and the wireless service costs $40 per month.
In looks, function, and price, RIM's new device resembles the Palm VII. The Palm VII combines the organizer functions of earlier Palm models with wireless access to information from the Web and e-mail messages. Palm (PALM: Research, Estimates) has priced the device at $449 and the wireless service at $45 per month.
"We came at the market from the wireless end and added organizing capabilities. Palm came to the market with an organizer and added wireless," said Mark Guibert, director of marketing at RIM.
The RIM 957 has two key advantages over the Palm VII. One of those is that the RIM 957 doesn't require users to set up an additional e-mail account - the mail they get over the device is the same as what is sent to their desktop address. By contrast, Palm users have to set up a separate address to receive messages. In addition, the RIM 957 is always logged into the user's e-mail server. Palm VII users, by contrast, have to raise an antenna and instruct the machine to retrieve new messages.
"RIM's new device is going to give Palm a run for their money in the wireless area," said Diana Hwang, who researches wireless devices at International Data Corp.
RIM is best known for its BlackBerry wireless e-mail system, which is very popular now at New York investment banks and law firms. Merrill Lynch, Salomon Smith Barney, CS First Boston and the chip giant Intel have outfitted their employees with RIM devices that resemble pagers. As with the 957, those devices give employees wireless access to the same e-mail they get on their desktops.
"The lawyers and investment bankers like the BlackBerry because they need fast information at their fingertips all the time," IDC's Hwang said.
Both Palm and RIM have had rapidly growing revenue and volatile, astronomically-valued stock prices. RIM's revenue for the year ended Feb. 29, 2000 rose 80 percent to US $85 million. Its stock has been as high as 175-3/4 and as low as 9-1/4 over the past 52 weeks. At Tuesday's closing price of 82, RIM has a market cap of about $5.3 billion, or 62 times its trailing revenue.
Palm, formerly a wholly owned subsidiary of 3Com Corp. (COMS: Research, Estimates) said in late March that its third-quarter revenue rose 116 percent to $272.3 million from $125.9 million in the same period in 1999. Palm became a publicly traded company on March 2, selling 23 million shares of common stock at 38 per share.
3Com still owns about 95 percent of Palm, which closed today at 38-1/2, just a hair above its IPO price, having plunged from an all-time high of 165. 
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