It has not been a very good year for shares of Research in Motion (RIMM). Shares of the BlackBerry and PlayBook maker traded for more than $30 a year ago, falling nearly 78% in the past twelve months. Just three weeks ago, shares were at $8.49, and have fallen nearly $2 since then. On Friday, shares were close to their 52-week low, but closed a dime off of it. Unfortunately for RIM investors, shares are heading for new lows, and it would not be surprising to see this stock trade for $5 or less before the ever important BlackBerry 10 launch, which is still months away. Here's why.
The overall reason can be found in what I said in the above "which is still months away." The Blackberry 10 launch is currently scheduled for sometime in early to mid January, and that's in Canada. The United States and other countries probably won't see the new phones for another 3-4 weeks after that, so that would be early to mid February. This is also assuming that there are no more delays with BB10. Should that happen, this stock will plunge.
So being months away from the launch, that means investors will have to sit through two more earnings reports, the first of which is scheduled for later this month, on September 27th. It is not going to be a pretty report. RIM stopped providing financial guidance a few quarters ago, so the only numbers we really can look at are the current expectations from Wall Street analysts. Those analysts see quarterly revenues falling 40%, from $4.17 billion in the year ago period to just $2.51 billion in this year's period. Now, before you tell me that analysts are being too negative, just look at what happened in Q2. Analysts were looking for a 37% fall in revenues to $3.1 billion, and RIMM still missed that, coming in at just $2.81 billion. On the earnings per share front, it isn't much better. Analysts are currently looking for a loss of 47 cents, compared to a profit of 80 cents in last year's period.
But that won't be all of the bad news. Research in Motion bulls have pointed to the $2.2 billion cash pile the company currently has, but the company said they will start burning through cash as they prepare for the BB10 launch. We'll see how much cash they've burned through when they report. If you thought that it couldn't get worse, just imagine what could happen if they announce another BB10 delay. They probably would only announce that kind of news at an earnings report. Now, if you think that the company will announce that they are moving up the launch when they announce earnings, that will definitely help shares, but I don't think that is a possibility.
Unfortunately for investors, analysts see the next quarter, to be reported in late December, to be even worse. For the fiscal quarter ending in November, analysts see revenues dropping by more than 55% from the prior year period, from $5.22 billion to $2.32 billion. In terms of earnings per share, the forecast is for a 42 cent loss, compared to last year's $1.27 profit in the period. Expect RIMM to burn through more cash in this quarter as well.
These two quarters will be ugly, there is no doubt about it. But I think there is a more important thing to watch, besides the possible launch date of the BB10 phones. It has to do with the PlayBook. If Research in Motion cannot sell many PlayBooks over these two quarters, they may want to get out of the tablet business. Research in Motion did launch a new Playbook, but just look at the competition in this space. We all know about Apple's (AAPL) iPad, and it is possible that Apple will release a new mini iPad within the next couple of months. Amazon (AMZN) also stated that they have sold out the Kindle Fire tablet, and that new models of that device could be coming this week. Google (GOOG) also has its Nexus tablet on the market currently, and Microsoft's (MSFT) Surface will be coming out in late October. There also are a number of other tablets out there from some of the large computer manufacturers. I don't think that Research in Motion can legitimately compete in this space, and the first PlayBook was not very successful. If this new one doesn't get off to a good start, the company should just cut its losses and focus on the phones. In the end, the BB10 phones will determine this company's future.
All of this should negativity send shares of Research in Motion to new lows. Revenues and earnings will be terrible in these two quarters that we will see reported before the end of the year. And if the numbers are really bad, the company will burn through more cash than expected. We are still four months away from the release of the BB10 phones, and that is if there are no more delays. If the BB10 phones mark a bottom in shares of this company, we are several months away from it happening. Remember, the first quarter to be reported that includes the expected BB10 phones won't be until March 28th. That's almost seven months from now. With shares at just $6.69 now, it wouldn't be a shock to see $5 broken over the next couple of months.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.