A Change of Heart on RIMM

 | Nov 27, 2012 | 9:57 AM EST  | Comments
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Last week, after Jefferies' Peter Misek upgraded Research In Motion (RIMM), I suggested that you take the opportunity to sell into strength and wait until after the company reports in December before buying.

It was bad advice. I changed my mind subsequently and went long the stock.

Why?

The coming release of BB10, the new phones from RIMM, in late January/early February, has clearly got the attention of investors and formerly bearish analysts who are trying to catch up with others who have been upgrading the stock and worrying about looking too bearish and missing a big stock move. They already missed the 100% move in the stock in the last couple of months.

However, what finally convinced me that RIMM is a stock to own now, ahead of the coming December earnings, is remembering the effect of the imminent release of the Palm PRE on Palm's stock.

Recall that in early 2007, Palm traded in the mid-to-high teens. Yet, thanks to the 2008 financial crisis, the stock plummeted, taking it down, by early 2009, to the low single digits.

But in January 2009, as the Las Vegas Consumer Electronics Show, CEO Ed Colligan introduced the new Palm Pre phone. It created a lot of buzz, because it seemed very iPhone-esque for an Apple (AAPL)-type device.

The stock immediately reacted to the buzz, quickly jumping to the high single digits. The ramp up in the stock continued until June 6, 2009, when the Pre finally got released for $200. By that time, the stock was nudging against $20. If you had bought it in the low single digits back in January -- a short six months earlier -- you made a killing.

Within a few months of the Pre's release, though, the stock started a death spiral downward. The reason was that Palm lacked the carrier relationships to push the phone.

RIMM is not similar to Palm in that respect. RIMM has 575 carrier relationships -- about double the number of Apple -- in 175 countries. BB10 will get a fair shot with these carriers to their end users.

But even if you think the BB10 will bomb once it's released, you should consider owning it for a Palm Pre-like ramp up into the product's February release, which is only three months away.

That's the primary reason I had a change of heart and have bought the stock.

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