Research in Motion (RIMM), a sob sister of a company, went up, up and away in trading yesterday on news of a deal with Microsoft (MSFT).
At this point, the move defines overdone. That's why we're suggesting going against the grain and selling RIM.
Where to start? With the carcass of the company that is RIM? That poor foresight and viciously good competition from Apple (AAPL) and Google (GOOG) that has handed RIM a one-way ticket to financial Palookaville? Or with the deal, a mere and measured patent agreement with Microsoft, that titillated traders misinterpreted as something more?
After taking its rightful place in the gutter year-to-date, falling nearly 50%, the stock jumped 2.28% yesterday on word of the news about the pseudo-deal.
OK, OK, it's somewhat better than nothing: Microsoft signed a deal to license RIM's exFAT file system for flash memory. But traders immediately wove that into tales of impending takeover. There's a sucker born every minute, but Steve Ballmer, CEO of Microsoft, is no sucker. OK, OK-he's a little bit of a sucker, but taking over RIM at this price would take a sucker of biblical proportions, as there is little holding the stock above where it is and zero.
Traders are creatures with short-term memory, but this might take the cake. RIM's last earnings report was more train wreck than financial event.
At the time (June), AllThingsD ran a headline for the ages: "RIM Earnings: Oh, the Humanity!"
Ironically, that-and even an accompanying photograph of the ill-fated Hindenburg--might have understated the case.
RIM reported a gaping wound of a first-quarter, with a loss of 37 cents per share on revenues that declined 42 percent. That missed expectations (hope for this zombie of a company apparently springs eternal). Plus, the company announced yet another delay of the Blackberry 10 and a sharp decline in BlackBerry shipments.
Outside of that, how did you like the play, Mrs. Lincoln?
Yesterday, even traders who weren't lost in the delusion that this deal was a prelude to a quick-hit takeover were casting their lot with RIM switching to Microsoft's operating system. But rather than a turn that will serve as a last ditch effort to save RIM, switching to Microsoft's operating system would be a long and arduous process. RIM doesn't have the time and, besides, Microsoft's operating system hasn't been an automatic ticket to success.
You want to buy this stock? Wait until that point in time-which may never come-when they are once again producing a product that is getting to the shelves, then flying off it. Don't fly off on wing and prayer hopes. The history here is too troubled; the downside is too steep.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.