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BlackBerry: Short the Rallies $BBRY

If only it were as simple as changing your name...

In case you missed it Research in Motion (Nasdaq: RIMM), the Canadian maker of the iconic BlackBerry smartphone changed its name earlier this week to BlackBerry and its ticker symbol to BBRY.

The name change coincided with the launching of the BlackBerry 10 operating system in what amounts to a do-or-die move for the company. A skeptical Wall Street responded by sending the share price plummeting.

Why the rebranding? It was ostensibly done to energize the company's employees, who have no doubt felt the effects of BlackBerry's woes in recent years. But more than anything, it was a way for CEO Thorsten Heins to stamp his name on the company and shed the baggage of the companies founders who had run it into the ground.

None of this will matter. BlackBerry is no more a different company than Altria (NYSE:MO) was when it ditched the name Philip Morris.

In the end, the BlackBerry 10 devices must be a smash hit, or the company will continue to slide into irrelevance. I hate to make the company and the stock all about one product, but that is the reality here. Yes, BlackBerry has large subscription revenues. But those revenues require users. BlackBerry is a software and services company only to the extent that it has hardware users to sell them to.

By all accounts, the BB10 devices appear to be nice phones with virtually all the features of an iPhone or Android device (and even a few new unique ones). But while the company was taking its time rolling out the product, Apple (Nasdaq:AAPL), Google (Nasdaq:GOOG) and Microsoft (Nasdaq:MSFT) all made significant inroads into the BlackBerry's core enterprise market. (Apple's emergence in enterprise was only made possible by BlackBerry's incompetence, by the way. If BlackBerry hadn't let Apple jump so far ahead of it in user appeal, they could have kept their virtual monopoly intact.)

What's more, the BlackBerry network simply isn't worth what it used to be. The week-long service outage in 2011 was a turning point for many (including myself). And carriers are pushing back on the fees they have to pay to support BIS/BES. BlackBerry has been somewhat quiet about the full extent, but if you are an AT&T or a Verizon, why would you continue to pay BlackBerry's network costs when competing devices don't require it? And adding insult to injury, in the consumer market, there is no BIS push email.

BlackBerry MIGHT have a chance of salvaging its enterprise business (though I consider this to be doubtful). But I do not see it getting the attention of consumers. It's too little, too late, and the brand is simply too tarnished.

Action to take: Short the RIMM/BBRY rallies. Be careful here, because this is a volatile stock. It was up 3% in premarket trading as I was putting the finishing touches on this article.

But over the course of the next several weeks, I see this stock drifting well below $10. As always, use a stop loss for protection. I would recommend something along the lines of a 7-10% stop.

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About the Author


Charles Lewis Sizemore, CFA, founder and editor of Macro Trend Investor (formerly The Sizemore Investment Letter), is dedicated to finding superior investments backed by powerful macro trends—before you hear about them on the nightly news or read about them in the newspaper or on the Internet. He has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal,and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

Charles is the co-author of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008); and worked alongside best-selling financial author and economic strategist Harry S. Dent, Jr. in creating original research on the effects of changing global demographics on asset returns and economic growth. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC,  a registered investment advisor.

His academic and real-life experience has given him a unique approach to investing: combining his insights into global macro trends with in-depth investor research. And he has developed a reputation for taking complex issues, recognizing long-term investment strategies, and then finding the hidden investing opportunities that he shares with investors.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar.

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