RIM Isn't Going to Bounce Back

Research In Motion (Nasdaq: RIMM  ) reports its latest quarterly results a week from today, and bulls should be nervous.

There's little hope of the smartphone pioneer orchestrating a turnaround in the near term. Analysts see the BlackBerry maker posting a beefy deficit of $0.47 a share on a brutal 40% plunge in revenue.

Don't assume that Wall Street's simply being overly pessimistic. If anything, analysts have been too generous in the past. RIM has come up short in three of the past four quarters, including posting a much larger loss than what the pros were targeting three months ago.

Earlier this year there was buzz building around RIM as a buyout candidate, but now it seems as if nobody wants to try to catch a falling knife. They see how badly things worked out for the buyer of Palm, and nobody wants to repeat the mistake of buying an operating system on the way out.

Just three months ago, analysts were banking on a profit of $0.45 a share out of RIM this fiscal year, growing to $0.58 a share in the new fiscal year that begins next March. Reality crushed the prognosticators. Now, all 45 of the major analysts following RIM see a loss this fiscal year. The consensus estimate also calls for another deficit next year.

It doesn't take a genius to figure out the problem. Apple's (Nasdaq: AAPL  ) iPhone 5 is hitting the market tomorrow with plenty of hype, and it's not even the world's most popular platform. Google's (Nasdaq: GOOG  ) Android operating system accounted for nearly two-thirds of all smartphones sold on the planet last quarter. In that time, RIM has seen its market share cut in half.

There's still money to be made with a shrinking slice of a growing pie, but RIM is shrinking too quickly. Apple and Google are too powerful, and now you have Microsoft (Nasdaq: MSFT  ) throwing billions at Nokia (NYSE: NOK  ) to see if there's room for a third relevant mobile platform.

Value investors may not see it that way. They see that RIM has been trading in the single digits since June. Isn't this the same company that at least one analyst thought Microsoft would buy out if it fell below $50?

Forget about the buyout promise from a few years ago. Set aside the forecasts of near-term profitability that died three months ago. RIM's in trouble, and the only thing left to decide is the magnitude of the ugliness that next Thursday afternoon's quarterly report will provide.

RIM shot
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The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Apple, Google, and Microsoft. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple and a synthetic covered call position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares of any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. 


Read/Post Comments (8) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On September 20, 2012, at 6:33 PM, ronbeasley wrote:

    Billionaire Prem Watsa, one of the best investors of our generation, recently accumulated a 10% stake in RIMM, and joined its board. It is now one of his largest holdings. But, of course, a subscription salesperson from the Fool (how aptly named vis-a-vis any reader who takes their advice) thinks he is smarter than Watsa.

  • Report this Comment On September 20, 2012, at 6:39 PM, cmstripling wrote:

    RIMM will be bought out for thier enterprise security infrastructure. The question is only for how much.

  • Report this Comment On September 21, 2012, at 12:42 AM, llIlllIlllIlllIl wrote:

    Poor old RIM, god bless her zombie bones. Unless they have a prototype Windows Phone 8 device in the lab as a fallback for the BBOS10 release then it will be too late for them come January.

    You can imagine the share price disaster in the weeks following the BBOS10 announcement.

    I guess the only option left for them is to keep the brand alive by merging with Nokia or Microsoft.

  • Report this Comment On September 21, 2012, at 5:50 AM, careersincloud wrote:

    We must all remember, the fool is an article site of opinions by those who write articles and not much more than that. This is not WSJ news.

    Rimm will be just fine in my opinion and a whole lot of shorts who are now getting greedy at these low prices will get burned in a company with zero debt, almost two billion in cash and book value of almost $20.. Only a real fool would go short imo.

    Rimm could change it's entire business and go into a new area if needed with all that case but it won't need to. It is out of favor, has short term problems and might even be bought out for $20 or more per share. It would need to be at least $20 per the cash and book value and I think MSFT would be the one.

    Either way, my 30 years investing and trading tells me to average down and that is what I will do.

    I am not here to advise anyone to buy, sell or hold any stocks and I am not a Broker but I do agree with a few posts on here. A smart man does not put all that money into Rimm to lose it.

  • Report this Comment On September 21, 2012, at 6:28 AM, PaulDEJ wrote:

    @ronbeasley, dont worry to much about infothathelp and !!!!!! (hope its spelled correctly), they obviously here to comment on any RIM articles and have no real interest. You know what they say, those that can do and those that can't talk. Like you I'll rather back Watsa than these clowns. Their biggest achievement in life is being able to learn to type so they can post on here.

    So RIM is dead hey. Funny how a dead company still releases new products, funny how a dead company still works on a new OS and sets a launch date for Q1/2013, funny how a dead company holds sold out developer conferences, funny how a dead company keeps on launching new handsets, funny how a dead company has 80 million subscribers and growing, funny how a dead company keeps on expanding world wide and is the leader in many emerging markets. Funny that.

  • Report this Comment On September 21, 2012, at 8:48 PM, melegross wrote:

    Some of you posters here really have your heads in the sand!

    Stop bothering to post about Watsa. He's been criticized heavily for this investment. It's being called the biggest mistake of his career.

    The truth must hurt, but it's still the truth. It is sad, and I would like to see them co e out of this. But it really doesn't look possible at this point.

    PaulDEJ, what real new products have they introduced this past quarter? No phones. No new Playbook. All have been around for months.

    You talk about BB10 and its phones as though they are a sure thing. But they are not. RIM first said they would be available late 2011. They weren't. Then early 2012. They weren't. Then late 2012. They weren't. Now first quarter 2013. It's dizzying as to how many times they've been delayed. And despite what you think, we really don't yet know if they will be available as promised this time either.

    And what has happened so far? The Playbook is dead in the water. The current phones are sinking fast. Businesses are ridding themselves of BES as quickly as they can. These are things you can't deny. You can easily find out for yourself by looking for the info on it. It's available.

    Lets face it, the CEO's wasted a good year by denying what was happening. But then, so did Nokia and Microsoft. Palm tried, but wasn't successful, despite a wildly successful reception of its new OS, WebOS.

    The problem for both RIM and Microsoft (and its ODM's), is that the window of opportunity has possibly closed for everyone except Android and iOS. By the time BB10 does come out, if it ever does, no one might care, other than a few loyal users. Everyone else will have moved on.

    If you can present a good, logical way for RIM, then please do so. But don't state hopeful possibilities as done deals. That doesn't make your position believable.

  • Report this Comment On September 22, 2012, at 10:27 AM, digitally404 wrote:

    What people keep forgetting here, is to look at the fundamentals of the business. RIM is a debt-free company, plenty of cash and patents.

    They are the No. 1 smartphone in Indonesia, a country with a population of 240 million.

    Blackberry's are still the most popular phones of business in the Forbes 500 list.

    Sneak-peaks of the upcoming Blackberry 10 (yes, it exists) are highly favourable. Despite the almost 1.5 year delay, there are still many developers on board for development on its new platform.

    New products include the Playbook LTE. For 2013, RIM is planning a host of new product releases, with at least 6 different phones.

    Playbook is the 2nd most popular tablet in Canada.

    RIM's marketshare in the US may have dwindled, but let's not be myopic and forget to look at the whole other side of the world.

  • Report this Comment On September 24, 2012, at 9:23 AM, melegross wrote:

    Actually, the iPhone is the most popular phone in the Fortune 500, RIM has dropped to number two, and will be exceeded by Android next year.

    Indonesia? Seriously. That's the best you can do? Even if true, it won't be for long.

    And yes, they are debt free, but $2 billion isn't all that much. With continually shrinking sales, expected to drop another 40% this past quarter, and heavy losses, they are already dipping into that cash. As cash flow dries up with their sales shrinkage, and losses, that hoard will also begin to shrink at an alarming rate.

    It's difficult to see where they go from here. Heinz has been preparing to sell the company, but so far, no one is interested.

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