RIMM Sends Tech ETFs Higher

by on December 18, 2009 | ETFs Mentioned:

Research In Motion, the Canadian Maker of the popular BlackBerry smartphone, reported strong third quarter results on Thursday, beating Street expectations by 6 cents a share and sending shares soaring up by more than 7% in early Friday trading. Many analysts had anticipated that increased competition from other device makers would drag down sales, but RIMM shipped 10 million smartphones for the quarter. BlackBerry

“The fact that they beat by more than half a million units in shipments in Q3 would seem to imply that they either maintained market share or took market share, and that the consumer business was quite good,” said Paradigm Capital Analyst Barry Richards. RIMM’s continued ability to expand beyond business users has boosted bottom lines: some 80% of new subscribers were non-business users in the third quarter. The company also reported that it will launch new offerings aimed at small businesses and corporate customers in order to maintain market share in that crucial segment of the market.  RIMM increased its guidance for the fourth quarter, predicting that EPS would be $1.27.

Although RIM has managed to thrive in an increasingly competitive environment, the news was not good for rival smartphone maker Palm, which reported smartphone sales down 29% from the previous quarter amid renewed fears that shipped phones are not selling on store shelves. Despite the bad news, many believe that the smartphone market still has a lot of room to grow. “I see that going all the way to 100 percent,” said Jim Balsillie, RIMM’s CEO, when discussing the market share for smartphones (currently 50% of  the total market for hand-held devices. “The only question is the time to getting there.”

The upbeat reports from market bellwether RIMM pushed many other smartphones makers upwards and sent many technology ETFs higher as well. Two ETFs that offer exposure to the smart phone market are QQQQ and MTK, which have 2.2% and 2.4% weightings, respectively. While these relatively small allocations to RIMM aren’t enough to move these funds significantly, news that consumers are continuing to spend on gadgets could be big news for the entire technology sector. Moreover, these ETFs also have significant weightings in Apple and Google, which are growing increasingly dependent on smartphones to generate revenue for their firms.

The Wireless HOLDR (WMH) currently has 17.7% of its assets in RIMM, and gained more than 2.3% after the company’s earnings report. Like most HOLDR funds, WMH offers concentrated exposure, holding only 16 stocks with 93% of its assets in the top ten holdings. Some of the other top holdings include; Verizon, Nokia, and Qualcomm. The fund is up 22% in 2009.


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