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Don’t Get Fooled by Research In Motion

Monday, October 1st, 2012
By for Profit Confidential

Don’t Get Fooled by Research In MotionWe’re back! Research In Motion Limited (NASDAQ/RIMM; TSX/RIM), at one point, was up over 14% last Friday, after the troubled “BlackBerry” maker showed some signs of hope; albeit in my stock analysis, the former Wall Street darling faces extremely difficult roadblocks ahead—namely Apple Inc. (NASDAQ/AAPL), Google Inc. (NASDAQ/GOOG), and Samsung.

Research In Motion (RIM) attracted some trading from speculators after reporting a lower loss than expected in its fiscal second-quarter earnings season. Revenues of $2.9 billion easily beat the estimate of $2.5 billion in spite of a year-over-year 31% decline. RIM added about seven million subscribers and finished the quarter with around 80 million global subscribers. The growth was largely generated from demand in the emerging markets based on my stock analysis.

We saw one sell-side firm assign an upgrade to RIM.

“The strong cash position and increasing subscriber base improves the company’s odds of a successful BB10 [RIM’s new operating system] launch. We also believe the value of the underlying assets can justify the share price,” wrote Scotia Capital analyst Gus Papageorgiou. While the rise in subscriber numbers are encouraging for this much misaligned company, based on my stock analysis. I still would not be a buyer at this time and would wait for the release of the “BB10” operating system in the first quarter of 2013. Of course, RIM has historically been late in its launches, according to my stock analysis, so don’t be surprised if it’s delayed.

Let’s take a closer look at the numbers. RIM sold 7.4 million BlackBerry smartphones, which was higher than the estimate calling for just seven million. The result helped to increase the company’s cash balance by $100 million, making the total $2.3 billion; RIM will need this cash to launch BB10. In my stock analysis, this could be the final opportunity for the company to try to regain market share.

Remember Apple sold five million “iPhone 5” units in the first three days after its announcement. (Read “You Can Still Play Apple in Spite of High Price.”) Apple plans to sell 50 million iPhone 5 units by the end of the year; so as you can see, my stock analysis is that RIM has a lot of catching up, unless its BB10 is off the charts as far as any functional advantages. Based on what I’m hearing and my stock analysis, the BB10 is an improvement, but it is not the killer device that will leapfrog it over the likes of the iPhone or “Android.”

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And don’t even ask about the tablet market, as RIM sold a mere 130,000 “BlackBerry PlayBook” tablets in the quarter, and these sales were largely due to heavy discounting. I just saw the 32GM PlayBook for $149.00 at Best Buy, but I still wouldn’t touch it due to the lack of available applications. For comparison, Apple sold 11.8 million “iPad” units in the first quarter and shipped 20 million in the second quarter. In my stock analysis, the PlayBook has no chance of survival.

“Despite the significant changes we are implementing across the organization, our second quarter results demonstrate that RIM is progressing on its financial and operational commitments during this major transition,” said Thorsten Heins, RIM’s President and CEO.

The key point in Heins’ comments is the “progressing” part. In my stock analysis, RIM remains a work in progress, and I’m not convinced we will ever see the final product.

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  • Jakester

    RIM should be allowed to drown in its pity. The two bozos that had the world by the gonads couldn't even keep their servers mounted and working for the millions of customers they had in the palm of their hands. Being hard headed and without vision and without ambition is what killed RIM. The two bozos who refused to take action and allow people with ambition and brains to take over the company — then step down — should have to watch the fruits of their labor die out. There are enough products on the market to replace anything RIM can do and who cares about staying with RIM's old technology when RIM can't even keep their servers up?

  • John in Newfoundland

    More than six months ago I read an article in which delays with BB10 were attributed to applications being translated from Java to C. I made a note to follow the issue and I have not been surprised to hear of further delays. As is often the case in software development an ideological tail has been wagging this dog for too long. This feels much watching a certain hat-wearing NFL coach failing to retire while he was near the top.

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  • Gregg Butler

    Yep, go for that Apple stock…how much room is there for it to double? hmmmmmm. RIM will be there for a long time, cause it has a niche and it remains true to it's niche. There is lots of room for this stock to jump in price many times it's value.

    RIM is still around, they have cut their fat, they are making their products, they are getting more subscribers, they are getting their development and they will have a release of a very good product… and they have lots of money in the bank.

    If you want to talk success with IT fine, but this is a site about stocks, so talk stocks. The reality is, there is more money to be made with investing in RIM than there is if one was to invest with Apple right now. Many people know it, but since many people have Apple stock (don't you George :) they don't want people to sell and by low in another company.

    So George, sell your doom and gloom all you want, it never really serves anyone except the losers than hang on the stock that won't go any hire…cough…facebook…lol

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George Leong - Financial Planner, ConsultantGeorge Leong, B. Comm. is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services. Add George Leong to your Google+ circles