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Rumors Abound On RIMM: Best Bet Is To Stay Away

|Includes: BlackBerry Ltd. (BBRY)

The once invincible company that was Research in Motion (RIMM) has started to show some dents in its armor. The maker of the Blackberry has seen its share in the smartphone market fall from 24% last year to just 9% this year. This along with lower guidance and a flop on sales of the Playbook platform have played a big role in the stock falling. The company once saw its stock trading at $140 a share in early 2008 but now trades at less than a tenth of that price ($13.78 at close on December 21, 2011). Despite all of this, the company's Blackberry brand still carries at least some value. Recent studies have shown that the phone still holds plenty of prestige in the UK for example. This has led to many rumors coming up that the stock is a potential takeover target. 

Who Might Takeover RIMM?

Rumors are just that....rumors. There is nothing to guarantee that whatever is being said about the companies that could takeover RIMM are true. With that in mind, the rumors have been that Amazon.com (NASDAQ:AMZN) or Microsoft (NASDAQ:MSFT) could be interested in taking over Research in Motion (RIMM). Research in Motion stock jumped some 10% just on the rumors that the company could be taken over. That is the most that the stock has moved up in the last 10 weeks. 

Yesterday it was reported that RIMM turned down an Amazon offer earlier in the year. The board at Research in Motion stated that it wanted to deal with the shortcomings in the company on its own. However, just the idea that Amazon was interested in the company was enough to send the stock higher. The speculation was that if Amazon was interested, then perhaps other companies are or will be interested as well.

Why To Stay Away

The primary reason to not pick up shares of RIMM is because they just popped up 10%. It is very likely that RIMM will give up at least some of those gains in the very near future. Stocks rarely trade up 10% one day without some give back in the next few. 

Aside from simple trading metrics, there are more reasons to ignore RIMM and look for better stocks. The company is currently trading on rumors. That is far too risky for the average investor to trade on. The average investor should instead be focusing his or her time on studying companies and doing their homework to find solid strong performers. Trying to get a play on a stock that is trading on rumors of a takeover are just too uncertain. It is important to remember that the offer by Amazon was turned down, so there was really no news reported in the rumors. 

At the moment, Research in Motion is just a company with a product that is losing market share and losing out to competition. That is not exactly the most exciting type of company to get involved with, and it is something that investors should stay away from until there is more clarity. That may take quite some time. 



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.