By Jon Fortt
July 13, 2007

The market has spoken: Research in Motion (RIMM), the Canadian company known for its BlackBerry smartphone, is worth more than Motorola (MOT), the world’s second-largest cell phone maker.

At least that was the tale of the tape when the markets closed today. RIM’s market cap of $42.3 billion edged out Motorola’s $41.4 billion. This despite the fact that RIM’s annual revenue of $3 billion is puny next to Motorola’s nearly $43 billion. (Yes, you read that right; Motorola’s market cap is less than its annual revenue.)

Why the difference? Investors care about profits more than revenues, and RIM’s delivering where Motorola isn’t.

The reason for RIM’s profit growth isn’t complicated. It’s software. Like Apple (AAPL), the Silicon Valley company whose iPhone is shaking up the wireless establishment, RIM has concentrated on writing code that allows BlackBerry users to manage their most valued information in the palm of their hands. While Apple’s iPhone focuses on music, video, pictures, e-mail, voicemail and the Web – the same consumer-friendly apps at the core of its Mac operating system – RIM’s specialty is serving business customers. Its BlackBerry allows reliable, secure access to some of the most important data on the corporate network.

Other cell phone makers aren’t so good at software. Partly because wireless carriers typically keep tight control over what capabilities they can include in phones, mainstream phone makers have typically offered basic handsets that handle phone calls, take pictures and video, play basic games, and do little else.

Chances are, the rise of RIM and Apple will change that; competitors will be forces to beef up their software efforts. But my bet is, it will take years for cell phone makers to figure out how to write good software into a phone and deliver it in a form that delights consumers.

That said, it’s possible the market is being a bit too hard on Motorola. Rival Nokia (NOK), the world’s top cell phone maker, has a market cap of more than $117 billion on $57 billion in revenue. Sure, Nokia’s profit picture looks brighter; but if Motorola can clean house, get itself in shape and get smarter about device software, it should have a shot at overtaking RIM again on the market value chart.

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