First take: likely stock reaction – neutral/slightly negative

The net outcome for F4Q is that although subscriber count will exceed expectations significantly, revenue will be near the mid-point of guidance, margin and earnings at the lower end of the guidance range.

Though the commentary suggests that the upgrade cycle is lengthening out and inventory is lean and that could weigh on F1Q, this could also lead to a spring loaded recovery later in FY10, when channel inventory gets replenished and the upgrade cycle returns to a more normalized rate.

The overall takeaway is mixed. The press release suggests that F1Q could be seasonally slower. Though the firm is forecasting a flattish F1Q, they suspect there is a risk that this forecast is too optimistic. That said, RIMM clearly has very strong positive momentum relative to other handset OEMs and is gaining significant market share, consistent with expectations. Though the commentary suggests that the upgrade cycle is lengthening out and inventory is lean and that this could weigh on F1Q, this could also lead to a spring-loaded recovery later in FY10, when channel inventory gets replenished and the upgrade cycle returns to a more normalized rate. The stock may come under some pressure today, in anticipation of weaker than expected F1Q guidance but they remain buyers of this strong growth story on the pullback. Firm believes the P/E multiple still does not reflect RIMM’s strong growth and ultimate earnings power.

Notablecalls: RIMM’s latest upside move was largely helped by analyst comments of Gross margins staying above the 40% level. Looks like this isn’t happening.

The good news is the subs growth but I think that in current environment GM trumps subs.

Do not think RIMM will go sub-$50 on this, though but I’m in no hurry to play the bounce here.