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Research In Motion: It’s Do or Die Time

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Research In MotionThe smartphone and tablet markets continue to be extremely competitive, and stock analysis indicates that this competition will heat up further.

Apple Inc. (NASDAQ/AAPL) dominates the tablet market with its “iPad,” but watch for new entries from Microsoft Corporation (NASDAQ/MSFT) with its “Surface” tablet, Google Inc. (NASDAQ/GOOG) with its “Nexus” tablet, and Samsung with its “Galaxy” series. And then there area also some believers surfacing as “BlackBerry”-maker Research In Motion Limited (NASDAQ/RIMM; TSX/RIM) gets set to launch new devices powered by its “BlackBerry 10” (BB10) operating system in the first quarter of 2013, though it has always delayed launches.

The question is: can Research In Motion (RIM) ever regain its former luster? My stock analysis tells me that the company has a long and tough road ahead of it, and while it’s unlikely it will catch Apple, the best-case scenario would be to take some market share away from Apple and the other players. The BB10 devices and operating system moved in the right direction after passing stringent security requirements from the U.S. government last week, which should help in the key advance sales.

On the Street, there appears to be some optimism, albeit it’s speculative that RIM can mount a comeback. Based on my stock analysis, I’m not convinced.

The market view appears to be more positive. When doing technical analysis of the chart, we can see that the stock has rallied 32% since trading down to a 52-week low of $6.22 on September 24, but is still below its 50- and 200-day moving averages (MAs). Strong pre-sales of its BB10 smartphone could drive RIM higher.

rimm stcok market chart

Chart courtesy of www.StockCharts.com

RIM attracted some buying after reporting a lower loss than expected in its fiscal second-quarter earnings season. Revenues of $2.9 billion easily beat the Thomson Financial estimate of $2.5 billion in spite of a year-over-year 31% decline. The key is that RIM added about seven million subscribers and finished the quarter with around 80 million global subscribers, which is still pretty good and offers some hope for its BB10 line, based on my stock analysis. The plus is that the growth was largely generated from demand in the emerging markets, according to my stock analysis. (Read why China is tops in “The Chinese Sector That’s a Hotbed for Growth.”)

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

While the rise in subscriber numbers is 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 line in the first quarter of 2013. Of course, the key for the company’s immediate and possible long-term survival will be its BB10 products.

Based on what I’m reading and my stock analysis, the BB10 smartphone is an improvement, but it is not a killer device that has RIM leapfrogging over the likes of the “iPhone” or “Android.”

In my stock analysis, RIM is a work in progress and will really need to deliver a great product; otherwise, it could be lights out in a few years.

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About the Author, Browse George Leong's Articles

George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »

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