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The BlackBerry Strikes Back

When the Blackberry PlayBook tablet goes on sale Tuesday, there will be none of the long lines of eager buyers that greeted the AppleiPad 2 last month. In fact, if you listen to the technorati and many stock analysts, the PlayBook will be a flat-out bust.
Made by Research In Motion (ticker: RIMM), the Canadian-based outfit behind the BlackBerry smartphone, the PlayBook will cost about the same as the Apple device, starting at $500, but, in the view of critics, will be clearly inferior. You won't be able to connect to the Internet via a cellular network—only by Wi-Fi—and there will be far fewer apps to download. That's not a completely fair evaluation, as we point out in Gadget of the Week. Nor is it especially surprising: RIM's critics miss a lot of important points.
Just look at how analysts piled on after the company reported its earnings on March 24 for the 12 months through February. They chose to ignore that profits and profit margins were all significantly better than expected—as was the guidance for the current fiscal year. Rather, the market focused on the fact that earnings in the current quarter, ending in May, would come in below Wall Street's targets, mainly because of higher one-time promotional spending on the PlayBook.
The PlayBook tablet, due out Tuesday, could be a big hit among corporations accustomed to BlackBerry e-mail devices. It's a handy size, and has a slick new operating system.
The stock plunged 12% overnight. After trading as high as 144 in mid-2008 and 75 last March, RIM shares now sell for 54. That's just 7.8 times analysts' forecasts for the coming year, and about half that of arch rival Apple's (AAPL) multiple of 14.4. It's even below troubled Nokia's (NOK) multiple of 11.2. The alarmist views of many are summed up in the headlines of news reports and research notes:  "RIM Outlook Dire," "Loss of Faith Deepens," "Can RIM be Saved?" and even "RIM Is Dead!"
The main worry is indeed Apple. Ever since the first iPhone launched in the summer of 2007, to immediate raves, RIM has been seen by investors to be in trouble. That simply isn't true. For all of Apple's inroads, the U.S. smartphone market as a whole has been growing at such a fast clip—more than 75% in 2010, for instance—that RIM has been able to continue increasing revenue and profits rapidly, up a compound annual average of 57% and 50%, respectively, over the past five years. RIM has never had a single quarter of net global subscriber losses, and, with sales volume almost 20% greater than Apple's, it remains the biggest smartphone player in the U.S. And while it lags behind Nokia worldwide, it has vast overseas growth potential.
IN SHORT, RIM ISN'T DEAD—or anywhere near it. 
Tavis McCourt, an analyst with Morgan Keegan, puts it succinctly: "RIM's valuation remains the theater of the absurd." He's expecting 40% revenue growth over the next few years and a stock price of 91 in 12 months.  Analyst Gus Papageorgiou of Scotia Capital, who dismisses the bearish case as U.S.-centric, has a price target of $120, more than double the current level.
Yes, RIM has lost market share. But the company virtually invented mobile e-mail and the smartphone, making the BlackBerry a symbol of new-millennium connectivity. For some time, it was the only player in town, with an obviously untenable 100% hold on the market. "It was inevitable we would lose market share," says Jim Balsillie, who together with Mike Lazaridis is one of RIM's two co-CEOs.
The company still has a clear lead. According to the U.S. research firm ComScore, BlackBerry is North America's biggest smartphone player, accounting for about 29% of subscribers—down from around 34% a year ago, but still more than Apple's 25% andMicrosoft's (MSFT) meager 8%. True, the phone makers using Google's relatively new Android operating system have 33% of the market, but that lumps together scores of devices from various


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