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Bears who were betting heavily against Research In Motion's (NASDAQ: RIMM) Q2 2013 earnings (released September 27th) got caught with their pants down when the company reported better than expected results. Its subscriber base was increased to 80 million, its revenue was higher than expected, and the (negative) EPS was much lower than expected.

It's hard for outsiders to understand why investors would forgive a consumer tech company that actually operates at a loss, but anyone that has followed the stock for a while knows that RIMM bulls are confident that the company can not only stay alive, but turn the tides in the smartphone market.

If you dig into RIMM's financial data, you can see some trends that bears can use to predict the company's eventual death. For instance, you can see that revenue in the Q2 2012 report declined 31% relative to Q2 2011. This implies that the company is actually shrinking.

The company's deteriorating profit margins are also concerning. Based on sales and COGS, margins are at a lowly 26% versus 39% a year ago. This decline can be attributed to the company's efforts to compete with lower pricing.

It doesn't help RIMM that everyone is expecting Apple's (NASDAQ: AAPL) new iPhone 5 to, once again, grab and dominate more of the smartphone market. Since the BlackBerry 10 won't be hitting the market until 2013, bears are getting more confident in their basic stance - "too little, too late." By their view, the BB10 has been delayed to the point where other smartphones have established their dominance in the market.

Nonetheless, BlackBerry's huge pool of 80 million subscribers shouldn't be ignored. The bullish argument for the BB10 points to this huge subscriber base, and the revenues that could be made with the next "refresh cycle" for RIMM's hardware.

I also wouldn't dismiss the company's strong balance sheet, which shows a $2 billion pile of cash that is actually bigger than it was last year. There is also no debt, which puts the company's net worth at ~$9.4 billion when including intangible, and illiquid assets. The market cap on RIMM? $4.3 billion. A stock with a P/B ratio of .45 is cheap, no matter how you slice it.

Having said that, RIMM's 18% rally after its good quarterly report is heavily based on just short-covering (evidenced by RIMM's now-lowered 15.7% of shares short). It could be considered a "sucker rally" under normal conditions, but the impending launch of BB10 is such a big deal for RIMM that every other factor can be virtually ignored.

Source: RIM: Back From The Dead, Or Sucker's Rally?