Research In Motion Is A Value Buy

| About: BlackBerry Ltd. (BBRY)

Research In Motion’s (RIMM) earnings last night were tough for investors. RIM reported a total and complete miss. I was on the lower end of the estimates with my low end of .84. RIM couldn’t seem to even get to my low end and the stock was smashed in after hours.

As I write this the stock price continues to fall from what appears to be panic more than logical selling. No one can argue that I am a perma-bull with RIM and don’t understand what is going on with its market share. I have written several bearish articles about RIM, Including my last piece questioning if the company will even be around in a year. The biggest problem RIM investors have had to deal with is the lack of leadership in the executive offices. Comments like there will never be a camera, or MP3 player, and no need for large screens shows how badly the top failed to maintain the momentum that was theirs to keep until they decided to be smarter than the market. We all know what happens when a company decides it knows more than the market and the market says “no, I want this instead." Companies like GM, Palm, Borders found out in a real big way.

It’s not any different for RIM so to say this time is different would be wrong. What RIM does have going for it is a strong built-in customer base, a new understanding of the marketplace, a good old fashion kick in the seat from the market to demonstrate things need to change, and active investors that will make the changes happen. Rocco Pendola has it right and wrong in his article. Like Pendola, I listened to RIM’s conference call. While conference calls are always a dog and pony show and this was no exception, the last quarter is more than priced in. RIM’s stock is trading around $24 or less a share. Pendola’s statement concerning the lack of transparency creating uncertainty is horrific and correct, but RIM is not a short here. Yes the price may go down, but the upside with some management changes is huge. RIM has the cash and the revenue to make the changes needed, and if not the buyout price of the company is likely to be north of $20 anyway.

I believe today’s sell-off is not totally from the numbers given in the earnings release, but rather in part due to the unfathomably horrid guidance management continuously feeds investors. Are they throwing darts at a board? Have they been serving lead pain sandwiches in the cafeteria? The guidance shows a serious disconnect between what investors want and what management is providing. Investors want and deserve better than getting hit over the head AGAIN with a miss of over 10%. It may be one thing to have a miss once in a blue moon, but it is never acceptable to repeat it over and again. The twins may be smart guys, but do they get it yet? It appears not from where I sit. Why no earnings warning? Both the twins are ignorant or incompetent and either way they are failing the shareholders in epic proportions. The twins either knew or should have known investors want a warning of a miss.

How long investors are going to tolerate being left in the dark is hard to say, but I am betting not much longer. I believe today marks a line in the sand and the die is cast. Things will be changing soon in management that will reshape and rebuild the focus of direction. I believe it will become clear as the first announcements start happening in the next six months. I believe that RIM is about to take a turn for the better and we may be seeing the low point for the company. The twins will be gone or moved to an area of the company where their talents will again add to RIM’s bottom line. Products will be released that are cutting edge and create consumer demand because of features and capabilities, not products that get laughed at because they are missing simple things like the ability to use it without a connection to a phone (yes I know it has Wi-Fi, but come on).

The financials of RIM clearly show the market understands the problem and more importantly it can be fixed. Today’s sell off may not be the very bottom as sometimes it can take a day or two for the panic to wear itself out. But I believe RIM is now a very strong value buy because I have no doubt management changes are around the corner. I want to be along for the ride when changes happen. I started buying in after hours yesterday and continued to do so in pre-market today. I believe the odds favor we are at or near the bottom. The best play in my opinion in gaining exposure to RIM and one I have started executing myself today is selling options. The premium is very rich and October 21 $20 strike price put options may be sold at the time of writing for about $.98 each. I believe the risk is lower than an outright buy of RIM and it provides an investor with an upside of almost a dollar even if the stock falls some from here (but stays above the strike). This is not a losing trade unless RIM falls to $19 a share.

Disclosure: I am long RIMM.