Research In Motion Corporate Finance

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Research In MotionCorporate Finance

• (Nasdaq RIMM TSX RIM)

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Outline

• Overview
• Company Description
• Business Model BlackBerry 101
• Investment Highlights
• Investment Concerns
• Investment Thesis Summary
• Performance

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Overview

• Objective
• Select a publicly traded company
• Invest your 100k into this company
• Buy _at_ opening bell Oct 1, 2007
• Sell _at_ closing price Nov 12, 2007
• Outperform NASDAQ Composite Index

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Company Description

• Research In Motion (RIM)
• Founded 1984 Waterloo, Ontario Canada
• Offices in North America, Asia Pac and Europe
• Enterprise and Consumer email market
• Designs, manufactures and markets
• Comprehensive Wireless Solution BlackBerry
  Ecosystem
• Handheld Devices
• Services
• Software
• Partnered with wireless providers

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Business Model
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Business Model

• Revenue from Sale of Handheld Devices
• BlackBerry brand
• Several form factors to address enterprise and
  consumer
• Average Selling Price 300 and higher
• As of Aug 2007 5.5million sold YTD
• Majority of RIMs revenue (75)
• 2007A 2.3b
• 2008E 4.4b

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Business Model

• Revenue from Services
• Monthly access fee charged to the carrier
• 7-9/mth for each enterprise subscriber
• 3-5/mth for each consumer subscriber
• As of Aug 2007 10.5million subscribers
• 1.45million subscribers added in Q2 FY08
• Approx 15 of RIMs revenue
• 2007A 450m
• 2008E 870m

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Business Model

• Revenue from Software
• Licensing fees for RIMs
• BlackBerry Enterprise Server software
• Client Access
• Maintenance and upgrade
• Charges are rated for each subscriber
• annuity
• Approx 4-7 of RIMs Revenue
• 2007A 210m
• 2008E 406m

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BlackBerry 101
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BlackBerry 101

• But first..some motivation

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BlackBerry 101
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Investment Highlights
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Investment Highlights

• Some more motivation..

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Investment Highlights

• Incumbent in Enterprise
• Adding more corporate applications
• Purchase of Ascendent provides PBX feature
• GPS, multimedia, ISVs
• Over 270 wireless carrier partners
• Over 100,000 enterprises with RIM software
• High switching and network disruption cost
• Proven reliability and security

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Investment Highlights

• Consumer Market
• Launch of Consumer phones last year
• Launch of new Pearl CDMA 8130 November
• FQ2 consumer subscriber accounts for 30 of RIMs
  revenue vs. 29 in FQ1
• Solid product portfolio in consumer market
• Carriers dropping data plan rates
• 9.99/mth
• Only 8 of the 81million(1) smartphone market
• lt1 of the 810million(1) mobile phone units
• (1) 2006 data

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Investment Highlights

• Global Opportunity
• 270 carrier partners in 110 countries
• Over 100 new carriers worldwide added in FY07
• BlackBerry connect 80 carrier partners
  worldwide
• Launch of new smartphones
• 8707 for UMTS network Japan
• 8830 for GSM/GPRS and CDMA/EvDO
• 28 of Subscriber and 35 of Revenue outside USA

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Investment Highlights

• Strong Financials
• Gross margin 56
• Operating margin 30
• FQ3 (current) guidance ahead of expectations
• 3.48m units consensus est. vs 3.7m units co. est.
• Revenue 1.5b (street) vs. 1.67b
• EPS 0.55 (street) vs. 0.63
• RIM share price is undervalued
• DCF basis ? 141.00
• Oct 1 price _at_ 98.05

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Investment Concerns
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Investment Concerns

• Did we saymotivation

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Investment Concerns

• High P/E multiple
• Highly Competitive Consumer Market
• Put pressure on price lower margins?
• Lack of brand recognition
• Shorter product life cycle and tougher design
  comp
• Risks related to Intellectual Property

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Investment Thesis Summary

• Compelling growth outlook large addressable
  market
• International
• Consumer
• Enterprise
• Earnings estimate to beat consensus
• Enterprise business adding value and applications
• Local and international carriers dropping data
  plans to 9.99/mth
• New CDMA Pearl model launched November

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Performance
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Performance
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Performance

• Oct 5 13.1
• FQ2 (August) Results
• Met expectations Strong FQ3 Forecast
• Doubled its bottom line
• Earnings of 287m vs 140m in F07Q2
• Oct 11 -6.0
• Profit taking
• Oct 23 11.4
• Announcement JV with Alcatel-Lucent
• Opened door to China market

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Performance

• Nov 2 5.0
• Fed Rate Cut - 0.25
• Market sentiment buoyed
• Nov 8, 9, 12 -18.9
• Unfavorable earnings release by Cisco
• Negative economic outlook by Fed Chairman
• Credit Crisis
• Panic! Panic! Panic!

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Performance
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Performance
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Performance
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Research In Motion

• Questions?
• Team 5
• Graves, Caldwell, Fried, Chandaluri, De Guzman