Research In Motion On Way To $20

| About: BlackBerry Ltd. (BBRY)

Readers may want to start from my previous article on Research In Motion titled What Is The True Value Of Research In Motion? In the article I described various scenarios for Research In Motion (RIMM). One of the scenarios I described was for Research in Motion to continue on its present path. The earnings report just issued shows that prediction is coming true.

The earnings for the quarter were $0.80 compared to the consensus of $0.88.

Revenues for the quarter fell 10% to $4.17 billion compared to the consensus of $4.47 billion.

For the next quarter, the company projects revenues of $5.3 billion to $5.6 billion compared to the consensus of $5.3 billion.

There are two shockers in the earnings report.

  • The company shipped only 200,000 Playbooks compared to the estimates of approximately 500,000.
  • Gross margins declined from 43.9% to 38.7%.

The conference call was downbeat. The company talked about the progress it has made.

The availability of new consumer Apps and multi-media and video content including BlackBerry Video store which will have 10,000 movies and TV shows available on demand to buy or rent as well as new movie releases on the same day as DVD availability and of course, with the built in HDMI output, the ability to enjoy videos on your TV without the need to purchase additional system components.

The market does not care about the foregoing improvements.

On the conference call, the company further suggested that its present operating system and the new operating system QNX will coexist for a while. Clearly, it is taking the company longer to transition to QNX than is required for the company to reverse its fortunes.

Bulls continue to regurgitate the following two arguments:

Intellectual Property

Bulls continue to contend that the intellectual property owned by the company is very valuable, but they are misinformed. Our analysis shows the value of the intellectual property owned by the company to be in the range of $1 to $4 per share.

Acquisition Target

Bulls continue to contend that the company is an attractive acquisition candidate. The acquisition scenario was discussed in detail in my previous article on the subject.

Bulls seem to ignore the obvious that an acquisition of this company will require a buyout offer in the range of $60 billion. There are not many suitors capable of writing a check of this size.

Information from Microsoft's (NASDAQ:MSFT) Analysts Day shows that Microsoft is not a likely acquirer.

The Quantitative Screen of the ZYX Change Method shows that the fair value of the stock in the short-term is $20 and $12 in the long-term if the company continues on its present path.

The company will continue to have serious difficulties competing with Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG).

Research In Motion is a short on any significant bounce from here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: When all six screens of ZYX Change Method are met, I intend to short sell RIMM at that time. I will also provide a signal on the Real Time Feed of the ZYX Short Sell Change Alert.

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