Research In Motion: This Sell-Off Is Just The Beginning

Sep.16.11 | About: BlackBerry Ltd. (BBRY)

Research In Motion's (RIMM) recent earnings report show concerns that I have about Research In Motion's business. The company missed revenue expectations as well as units sold. (See earnings call transcript.) What is most concerning about this earnings miss is that many analysts had lowered their expectations going into the earnings report. RIMM should have easily beat if they were going to turn around. Here are some concerns that I have about the company's Q2 2011 earnings report:

  • Net income was $419 million, or 80 cents per share compared to earnings of $797 million or $1.46 per share, in the same quarter the previous year. Analysts has expectations of 90 cents per share.
  • BlackBerry shipments during the second quarter were much less than expected. The company shipped about 10.6 million units, which was below the forecast of 11-12 million units. Playbook tablet shipments were much less than expected as well, with about 200,000 units shipped. This is below expectations of over 450,000 units. I expect this trend to continue into the third quarter.

I wrote about my bearishness in my last article, Research In Motion: Signs Of The Upcoming Sell-off. I'm bearish on Research In Motion and will remain so until they can produce a product line that can compete with Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL). I'm afraid that RIMM is still in denial and is falling way behind competition. The most recent product launch was supposed to get RIMM back in competition with the other manufacturers. As we can see from the shipment numbers, RIMM is out of touch with its customer base. Customers are looking for more value from their devices and RIMM failed to deliver.

Research In Motion may ultimately turn into a good long term buy at some point but until then I expect it to fall further. I view the $20 area as a key support. If RIMM were to break below that area I would expect a large move down.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in RIMM over the next 72 hours.

Additional disclosure: I own wireless retail stores that sell RIMM products.