It’s amazing how momentum works. It is a big driver of both stock prices and business performance as well. Academic studies have shown that companies that beat results in the recent past are more likely to do it again. I think people forget how big a factor momentum plays in a company’s operations, and with that in mind, Research In Motion (RIMM) has it going squarely in the wrong direction.
Last Thursday, RIMM said that 2012 fiscal second-quarter earnings came in at 80 cents per share, which missed estimates for a profit of 88 cents. Sales of $4.2 billion also missed the mark by almost $300 million. Those looking for their new Playbook Tablet to save the day will be sorely disappointed at this report as only 200,000 were sold, well below estimates.
Even the usually upbeat press release contained this downer:
“Overall unit shipments in the quarter were slightly below our forecast due to lower thanexpected demand for older models,” said Jim Balsillie, Co-CEO of RIMM.
Key Statement
This short sentence hits at the heart of why investors are abandoning the stock. Basically it is getting killed by that company from Cupertino, California, and people see this company as becoming obsolete. The new Playbook Tablet was supposed to pick up the slack and compete with the iPad, but reality has hit RIMM, and this will not happen.
I wrote a piece a few months ago stating how RIMM was a classic value trap and these results are proving that statement. There is still value at the company but I don’t think its shares should be bought anywhere near these levels. They need a new blockbuster product to take its reliance away from the BlackBerry.
Until that happens, the only potential catalyst for the stock is a possible takeover by a bigger fish. Even then, I’m not sure what kind of premium it would receive. I might get interested in the stock closer to book value around $18, but until then it is a clear “Avoid.”
RIMM Lays An Egg… Again is an article from: 
