Business 2.0 points out that Motorola (MOT) and Research In Motion (RIMM) have about the same market cap at around $42 billion. The may tell Wall St. more about RIMM being overvalued than Motorola being trashed by investors. RIMM has revenue of $3 billion to Motorola’s $43 billion.
RIMM’a stock price is up 250% over the last year. Granted, in the last quarter, its revenue rise 76% to over $1 billion. Operating income rose the same amount.
The problem with RIMM’s valuation is the most of its sales are still hardware. In the last quarter, that was 76% of revenue. And revenue-per-device is falling. During the period, device revenue was up 90%, but the number of devices shipped rose 99%.
Services and software revenue, which should have higher margins, grew much more slowly. 48% and 29% respectively.
Motorola’s stock is a mess. It is down 5% over the last year. So, it could be argued that, given the company’s huge problems, it should be down more.
But, RIMM trades at 10x revenue. At a little over 5x, Apple (AAPL) is not even close, and its dominance in the portable media player industry is much greater than RIMM’s is in smart phones.
RIMM is expensive by any reasonable measurement.
Douglas A. McIntyre