David George-Cosh
Sun
TORONTO — Investors sent Research in Motion Ltd. stock to a record high Tuesday — at one point making it Canada’s most valuable company — after it revealed it had partnered with telecommunications giant Alcatel-Lucent to sell BlackBerrys in China.
RIM’s stock surged to $120.42 on the TSX, up 8.2 per cent, after the announcement that the 8700 BlackBerry model would be distributed in the booming Chinese market later this year. No specific date was given for distribution.
Peter Misek, Canaccord Adams’s senior technology analyst, said RIM’s developments in China are just the beginning of what could be a banner year for the Waterloo, Ont.-based company.
“This is going to be the biggest company in Canada,” said Misek, who rates RIM a “buy.” “The company is a world beater and its technology is second to none.
“It’s got an excellent execution engine and tremendous earnings growth. This is just step one for RIM in China. They’re going to have additional partnerships, additional devices, additional services.”
China poses a huge opportunity for RIM. The country is relatively untapped in terms of wireless-device penetration. More than 10 million workers are employed in Fortune 1000 firms and about 400 million middle-class residents are flush with disposable income in a culture that embraces new technology.
However, RBC Capital Markets analyst Mike Abramsky said Tuesday’s market reaction was ahead of itself and valuing RIM mostly on its long-term prospects rather than what he called “modest traction in the short term.” He rated the stock as an “outperform.”
Still, the announcement drove RIM’s market capitalization to a peak of $69.2 billion, surpassing Royal Bank of Canada as the country’s most valuable company for much of the afternoon.
RIM’s shares are the biggest success story on the TSX, rising 138 per cent this year and more than twentyfold over the past five years.
Concern over RIM’s entering the risky Chinese market, said Misek, should be calmed with its decision to partner with Alcatel-Lucent, which has strong roots in China.
“Alcatel-Lucent has been … in China a lot longer than RIM has, for about the past 25 years,” he said. “You have to have senior politburo contacts in order to do business in China in the scale that they’re looking at.”