Popping the BlackBerry Bubble

Don't say you weren't warned. When Research In Motion (Nasdaq: RIMM  ) failed to impress a jaded Street gang last night, the BlackBerry maker's stock was taken behind the woodshed for a good old-fashioned beating.

The first-quarter results themselves weren't bad. Revenue of $2.24 billion was more than double the year-ago haul, and it was up 18% from last quarter. Earnings per share came in at $0.84 per diluted share, up from $0.39 per share last year. Most companies would sell their aunts for a quarter like that, but it wasn't good enough by RIM's standards; analysts were expecting around $0.87 per share.

Sales for the next fiscal quarter are supposed to land at a strong $2.6 billion, give or take $50 million or so. But increased marketing and R&D expenses will bring next quarter's earnings between $0.84 and $0.89 per share at best -- slightly below the current consensus estimates of around $0.90. And so the stock price took an immediate 12% dive.

The company appears to be gearing up for war. The next-generation Apple (Nasdaq: AAPL  ) iPhone will hit store shelves in a couple of weeks, and Google (Nasdaq: GOOG  ) has handset partners like Motorola (NYSE: MOT  ) and Samsung lined up for the launch of its Android platform a couple of months later. Nokia (NYSE: NOK  ) is nibbling at the BlackBerry's traditional home field with new models of a corporate-use slant, and Sony (NYSE: SNE  ) Ericsson (Nasdaq: ERIC  ) might jump aboard that Android bandwagon, too. The competition looks ready to launch a massive onslaught on everything the BlackBerry is doing right in the enterprise market.

So I don't think that RIM's increased spending is the real reason for the price drop today, nor do I think the lowered earnings guidance is to blame. Instead, these items were taken as confirmation that the company is readying for a fight -- and it's a battle it might not win. Today's drop was steep, but the stock still trades at 55 times trailing earnings at prices not seen since late April. It can still fall a lot further ...

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Fool contributor Anders Bylund owns shares in Google, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like. Foolish disclosure loves blackberry cobbler, but not with crushed smartphones on top.


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