by Tom Taulli | December 16, 2011 11:56 am
Back in March, I wrote a piece for InvestorPlace.com about how Research-In-Motion[1] (NASDAQ:RIMM[2]) was a good short-sale candidate. At the time, the stock was trading at about $65.
Even though I was fairly bearish, I didn’t expect a complete implosion. Which is what we have now: The stock is $13.38 (down 11% in today’s trading alone). Then again, Thursday night’s earnings report was horrendous. In the third quarter, earnings fell by 71% to $265 million, and revenues were off by nearly 6%.
In my March piece, I mentioned the threat of Apple’s (NASDAQ:AAPL[3]) iPad, which was a runaway hit. Yet I had no clue that Amazon (NASDAQ:AMZN[4]) would also launch its own tablet, the Kindle Fire. The result is that RIM has nothing to show investors except a large pile of PlayBook tablets that nobody wants to buy.
Basically, RIM is suffering from an innovation deficit. The BlackBerry 7 was a dud, and the company’s next-generation models won’t hit the market until the latter half of next year, another bomb RIM dropped yesterday with its earnings report. As a result, developers have little incentive to create apps for the platform.
It seems inevitable that the large mobile carriers, like AT&T (NYSE:T[5]) and Verizon (NYSE:VZ[6]), will move away from RIM handsets. Simply put, there are too many better alternatives.
True, with the corporate business, RIM does have a massive installed base of users. The company talks up its focus on security, reliability and integration with software like Microsoft’s (NASDAQ:MSFT[7]
) Exchange corporate email system.
But the problem is RIM’s customers are seeing something else, none of it good. In addition to delayed products, in October RIM suffered a costly three-day outage of its service. And Microsoft is getting aggressive with its Windows 8 smartphone platform. No doubt, it will also integrate seamlessly with Office and Exchange. Again, why does a company need BlackBerrys anymore?
RIMM share may be close to a bottom, but they’ll probably stay here for years. This has happened with other former high-flying mobile operators like Nokia (NYSE:NOK[8]) and Palm (remember the gotta-have Pilot?). The fact is that it’s extremely difficult for a tech companies to pull off turnarounds. History shows just a few examples, like Apple and IBM (NYSE:IBM[9]).
So, for investors tempted to buy RIMM now — with the valuation looking dirt-cheap — it’s probably still a bad idea.
Tom Taulli runs the InvestorPlace blog “IPOPlaybook[10],” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling”[11] and “All About Commodities.”[12] Follow him on Twitter at @ttaulli[13]. As of this writing, he did not own a position in any of the aforementioned stocks.
Source URL: https://investorplace.com/2011/12/rim-dont-expect-things-to-get-better/
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