3 Million Addicts Can't Be Wrong

It has become accepted wisdom that Apple's (Nasdaq: AAPL  ) iPod is the new must-have. That's because the music player-cum-fashion accessory has rejuvenated the Mac maker's prospects in almost every respect. Sales have accelerated dramatically. Profits are skyrocketing. And some of Apple's retail stores have lines so long that they've left some our own Foolish writers wanting to duck and cover. I've seen nothing like it in the tech industry.

Well, almost nothing. Research In Motion's (Nasdaq: RIMM  ) BlackBerry -- which some have come to affectionately call the "CrackBerry" -- just inked its 3 millionth subscriber. The latest million came in less than six months, 33% faster than last time. And now management says it is gearing up for as many as 10 million subscribers. In other words: The CrackBerry is aping the iPod.

But is it really? Management's confidence is a good sign, and so may be RIM's inventory buildup. During the typically blowout Christmas quarter, Research In Motion actually grew inventory by almost 4%. Sure, sales rose nearly 11% over the same period, but manufacturers usually clear out their stockpiles of consumer items during the holidays to make room for new models in the new year.

Promising as that is, we won't know whether Research In Motion is too optimistic until we see its fiscal 2005 annual report. In the footnotes therein -- it was footnote No. 5 last year -- RIM will provide a more thorough breakdown for how inventory is divided between raw materials, works in process, and finished goods. Companies that grow raw materials and works in process while trimming finished goods are experiencing what legendary investor and author Thornton O'Glove called "positive inventory divergence." It's a powerful indicator that shows, in effect, that finished goods can't be made fast enough to satisfy demand. (How powerful, you ask? Tom Gardner has generated massive returns for subscribers to Motley Fool Hidden Gems by finding and investing in companies with positive inventory divergence. Take a risk-free trial today.)

Having teamed with David Gardner to write the investing case for rival palmOne (Nasdaq: PLMO  ) , I can't say I've long been a fan of Research In Motion. I've even thought of shorting the stock. But no longer. The iPod proved there is no substitute for loyal users and cult-like popularity. I failed to take advantage of that when I first valued Apple. You can bet I won't make the same mistake with Research In Motion.

Get hooked on these Fool tech takes:

  • Research In Motion has already passed "Go," but I'll bet it will collect quite a bit more than $200.
  • The BlackBerry came up roses in settling its patent litigation with NTP.
  • When Microsoft (Nasdaq: MSFT  ) deals, Nokia (NYSE: NOK  ) wins. And that's not good news for smartphone makers like Research In Motion.

Only a Fool would promise to smash the market and then deliver. But that's exactly what Tom Gardner and his merry band of Fools atMotley Fool Hidden Gemshave done. Get in on the action. Take a risk-free 30-day trial today.

Fool contributor Tim Beyers does a lot of research, but never in motion. That would make him, uh, dizzy. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.


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