A Case for Shorting Research In Motion

Bargain-shoppers will tell you that last week's sell-off of shares in Research In Motion (Nasdaq: RIMM  ) was overdone.

"OVER-reaction," wrote CAPS All-Star jamespeer. "Not uncommon in today's market, seems like all we see nowadays are over-reactions. I expect this stock to recover fully by Q4..."

I'm unconvinced. Even if RIM is gaining market share from everyone except Apple (Nasdaq: AAPL  ) and perhaps Palm (Nasdaq: PALM  ) , the BlackBerry maker has never been so poorly positioned.

Why? Mobile services are no longer network-dependent. Where AT&T (NYSE: T  ) , Verizon (NYSE: VZ  ) , and Sprint Nextel (NYSE: S  ) once called the shots, software developers are now in charge. And they're increasingly devoting their coding time and talent to the iPhone. Palm's webOS also shows promise in this area.

The numbers really are frightening. Research In Motion's BlackBerry App World hosts 844 games, which seems like a lot until you stack it against the 16,580 found in the iTunes App Store. Games are going mobile as RIM stays home.

Numbers like that leave our 140,000-strong Motley Fool CAPS community unimpressed:

Metric

Research In Motion

Recent price

$68.91

CAPS stars (out of 5)

**

Total ratings

5,150

Percent bulls

83.1%

Percent bears

16.9%

% Above 52-week low

96.6%

Sources: CAPS, Yahoo! Finance.
Data current as of Sept. 27.

"I think they get cooked by the iPhone. They don't have an ecosystem to support themselves, and what they provide is now pretty easily replaced," wrote Foolish colleague and Motley Fool Hidden Gems co-advisor Seth Jayson last week.

I agree, and I've shorted RIM in CAPS as a result. But that's also just my take. Would you short Research In Motion at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

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Fool contributor Tim Beyers had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is a Division 1 talent playing in a Division 3 league.


Read/Post Comments (9) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 28, 2009, at 11:16 AM, tiobueno wrote:

    And Statsgeek player too shorted RIMM...

  • Report this Comment On September 28, 2009, at 11:37 AM, plange01 wrote:

    its a little late to be short rimm.now is the time to buy! of the 2 aapl is a far better choice to short

  • Report this Comment On September 28, 2009, at 4:24 PM, swlaaggie wrote:

    Yea, I read all of these negative comments last time RIMM dropped from 80+ to the low 60's. RIMMS world was coming to an end. Everything from their OS was not keeping up to a lack of quality.

    Given that RIMM is primarily a business phone, would you really expect a ton of energy put into game apps? Also, YOY subscribers were still up. ASPs were lower than expected primarily driven by a quirk in the product roll out cycle.

    Nope. I agree with the person above who said you missed the opportunity to short RIMM. I expect RIMM to drop to the low 60's again and then recover to 80+ again by their next report. We'll see.

  • Report this Comment On September 28, 2009, at 4:53 PM, hhpn wrote:

    you gotta realize that every single Analyst on the Walls knows that damn RIMM usually estimates their profit much lower than they could (so they can easily meet and beat next quater huh, stupid RIMM, isn't it) they (analyst) never question on RIMM under estimated but this quarter. why? it is easy to understand cause RIMM has gone up to quick and too far purposely, so this is time for them to knock that RIMM down to make profit and to look for chance to acquire RIMM back with a much lower price. i personally cant guess how low it can go given the current condition of market and economy, if GDP and consummer report come out good tues and wed, i think Rimm will make its way back to be on the headline for good.

  • Report this Comment On September 28, 2009, at 5:31 PM, stonebusted wrote:

    I agree that Rimm's Blackberry is more slanted to the business consumer. With that in mind, where I don't see Rimm overtaking Apple I believe ther is still plenty of upside for both or all three if you count Palm.

    The Bears are siezing every opportunity to sell, the music stopped for a moment and Rimm didn't have a chair.

    Looks good at this level. I'm buying a pretty good chunk while its cheap. I hate the term but I think its buy, buy,buy!!!!

  • Report this Comment On September 28, 2009, at 11:20 PM, topsecret09 wrote:

    Do not like RIMM at all . Any close below $65.50 would be very troublesome looking at my charts. Very likely to do just that. TS

  • Report this Comment On September 28, 2009, at 11:25 PM, topsecret09 wrote:

    The biggest overreaction today was In XEROX. This Is a good fit for them. I would rather buy 700 shares of XEROX than 100 shares of RIMM

  • Report this Comment On September 28, 2009, at 11:49 PM, ab8130 wrote:

    The good strategy is to own both Apple and RIMM. There's room enough for both and they do cater to different consumer markets. This play of one against the other doesn't make any sense.

  • Report this Comment On February 05, 2010, at 9:17 AM, alabama4606 wrote:

    jamespeer was right, the stock did recover fully from that sell off by Q4, great insight!

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