I can't really knock the recent results of BlackBerry maker Research In Motion (Nasdaq: RIMM). After all, there's some strong growth going on up in Toronto, and nice cash flows follow in its wake. But there's a lot more to the story than a short string of nice quarters.
For example, the BlackBerry line is pretty nice. Once upon a time, it was pretty much the only choice for professionals on the go who needed to read and write emails on the road, in meetings, at lunch, or everywhere else. That first-mover advantage is long gone now.
Mobile email and chatting is everywhere today. You don't even need a real smartphone like the Apple (Nasdaq: AAPL) iPhone or a Palm (Nasdaq: PALM) Treo anymore. My last cell phone was a decidedly low-end Nokia (NYSE: NOK) model that didn't even have a camera, but I could email to my heart's content with built-in interfaces to Yahoo! (Nasdaq: YHOO) and Google (Nasdaq: GOOG) Web mail services, among others. And that was three years ago.
You can give RIM credit for helping to start the mobile messaging craze, perhaps, and the company is still riding that wave. It won't last forever, though. What once was a moat is becoming a commodity -- nay, a necessity -- for every phone on the market.
And the market seems to expect the gravy train to roll on forever. The stock trades at nearly 66 times trailing earnings today, while Palm and Nokia hover around 15 times earnings. You prefer price-to-sales for such a retail-oriented company? Fine. Nokia stock is priced at about twice its trailing-12-month sales, and none of RIM's competitors is worth more than seven times annual sales. But a share of RIM goes for 13 times trailing sales.
Sure, the ride could go on for a little while longer. But unless the company pulls another rabbit out of its hat, at least as impressive as the original BlackBerry trick, RIM is destined to burn in commodity hell sooner rather than later, and those lofty multiples will come crashing down to Earth. Longtime shareholders who dared to sit through the lawsuit purgatorium of the last five years have been rewarded with a staggering 4,300% return. Take those profits and back away slowly, guys. The fun and games will be over soon.
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