1 Million More Served

There's momentum, and then there's momentum. Momentum is when a company strings together a few quarters of rising earnings. Momentum is when it can do that, and add a million subscribers in nine months. Sound impossible? Not if you're Research In Motion (Nasdaq: RIMM  ) , maker of the apparently addictive BlackBerry wireless communicator.

In a statement yesterday, the company said it now has 2 million subscribers to its wireless services, double its total from February. Research In Motion attributed the growth to successful partnerships, product innovations, and global expansion. Investors responded by chasing the stock like a starving mouse stalks a block of cheese, sending the shares higher by nearly 7% on better-than-average volume.

For the uninitiated, Research In Motion's BlackBerry device debuted in 1999, primarily as a means to connect wirelessly to corporate email accounts, allowing executives to check their inboxes from virtually anywhere. Think the idea has caught on?

Competition is heating up, though. The BlackBerry, sleek as it is, still comes up short on features when compared to palmOne's (Nasdaq: PLMO  ) new Treo 650. Nokia (NYSE: NOK  ) also recently forged a partnership with privately held Good Technology to build a competitive new smartphone.

Frankly, I doubt anyone will knock the company off its high horse in the next few months. Still, the market for devices that mix phone and data services, like the Treo and BlackBerry, is as wide open as you can get in today's tech world. Yet you wouldn't know that from checking Research In Motion's stock price. As I write, the company is valued at $16.5 billion, more than -- wait for it -- 17 times its annual sales. For perspective, consider that Nokia trades for two times sales and palmOne for even less than that.

Then there's Research In Motion's forward price-to-earnings ratio, which -- at 35 -- anticipates ongoing growth of more than 30%. That wouldn't be an issue except that it appears no one on the Street is expecting more than 26% growth heading into fiscal 2006. So you'll have to pardon me if I think the company's valuation is from the "Are you kidding me?!" school of investing.

Is Research In Motion a great firm? Undoubtedly. But of the many investing lessons of the past few years, none is more important than this: Buying stock in great companies whose shares are priced for perfection is the surest path to poor returns.

For related Foolishness:

  • Nokia's smart shot is aimed straight at Research In Motion.
  • The BlackBerry made Oprah's list of favorite things last year. Will it repeat?
  • Rumor has it the device is so addictive that some call it the CrackBerry.

Do you wish you had gotten in early on the smartphone revolution? Willing to accept some risk for the possibility of massive rewards? Yes? David Gardner'sMotley Fool Rule Breakersnewsletter was created just for you. Give it a try, risk-free, for 30 days.

Fool contributor Tim Beyers is a gadget geek, but he doesn't own a BlackBerry or a Treo, or anything even remotely resembling either. He also doesn't own stock in any of the companies mentioned. To take a peek at what Tim does own, check his Fool profile, which you can find here.

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