Don’t Get Fooled by Research In Motion

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.”

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.