Blackberrys are hotter than ever -- and so are shares of their manufacturer. By Lisa Dixon September 29, 2006 Here's something worth texting: On Sept. 28 the maker of the Blackberry announced it beat analysts' second-quarter expectations and would whip forecasts for the third quarter. Propelled by that news, Research in Motion's stock surged 19%, to close at $103 on Sept. 29. RIM shares (symbol RIMM) have been climbing since early August as investors looked for signs that the company's new products would catch on. Now they have it. RIM says second-quarter profits hit $140.8 million, or 74 cents per share, above the average estimate of 71 cents among Wall Street analysts surveyed by Thomson First Call. Revenue was $658.5 million, up 34% from the year-ago period and also above expectations. The firm says it should earn revenues from $780 million to $820 million in the third quarter, and that it expects to add 800,000 new subscribers to its exiting 6.2 million base. The firm's growth has traditionally come from sales to big businesses and government institutions that issue RIM devices to employees. But growth in this market can't go full speed ahead forever. So the Ontario, Canada, firm is turning to the consumer market, and apparently has a winner in products such as the BlackBerry Pearl, launched earlier this month. The Pearl and forthcoming devices are for small business owners and others who buy them at retailers, and who use them for both personal and work reasons. The Pearl (now sold by T-Mobile in the U.S.) makes calls and does e-mail, but also has a camera and music player and a other features. Though hard sales figures aren't yet available, the device "appears to be exceeding its lofty expectations," John Lynch, an analyst at Needham Co. Advertisement Several moves, including cheaper service plans and more marketing, will keep subscriptions growing. But just as important are existing subscribers trading up to latest models with the new features. Lynch says that, overall, the company expects the number of handsets sold to be double the number of subscribers added. Handsets account for about 70% of the company's sales, with subscription fees and software accounting for most of the rest. Of course, RIM is not the only game in town. Motorola, Nokia and Palm are grabbing big chunks of the smart phone market. But there's plenty of opportunity to go around: Morgan Keegan analyst Tavis McCourt says the market is growing at least 40% a year. The biggest risk to all smart phone makers is keeping up with the competition. Making devices that are ever more useful is the key for corporate customers. But consumers add a layer of complication, McCourt notes. Winning over consumers means offering more style and cool features -- which in turn means constantly coming up with new products. "It's almost like the fashion industry," he says. Today's headline-making smart phone can quickly become old news. So, is RIM still a good buy after a 20% jump? Sell and collect your profits, says Citigroup analyst Daryl Armstrong. And even McCourt thinks the stock will likely dip from today's high. But he thinks the long-term potential is there. It's a risky stock, he says, but RIM is a "very small player in the wireless industry," with a lot of room for growth.