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RIMM - another tipping point?

|Includes: BlackBerry Ltd. (BBRY)

This article is not about providing you the numbers (fundamentals) or chart patterns regarding RIMM (the company).  Here are some fabulous SA bloggers on the topic...


It also isn't about comparing the Blackberry to the iPhone or an Android.  I believe there are more than enough astute bloggers in SA that have passionately argued both positions (long or short).

I've always wondered why certain securities move (up or down) regardless of fundamentals.  I've seen stocks during the days rocket up regardless of P/E's and any other logical metrics you can find with never a shortage of loyal followers (remember the "Silicon Investor" site?) swearing it was the next "big" thing...only to see it crash and burn and then blame the company!

What I'm interested in is on whether or not one can use publicly aired dirty laundry (and how the targeted companies react to them) to trade profitably. 

Think about the analysis below stemming for a behavioural or psychological perspective.

I'm calling them "tipping points"...and trade the follow thru like this...

Let's take the most current poster child that has attracted a bit of public news lately for all the wrong reasons - RIMM.

When Laziridis blew up on the poor belligerent BBC reporter; it led to an "aha" moment for me that was rewarding. 

Analysis: Was the response normal for a public figure like Laziridis? or did it reflect the strains he felt from what was going on inside the company?  If the latter was true, one could surmise that things weren't as rosy as they have preached it to be.

What happened later?  Well...look no further than below...

or this...

Fast forward today.  Will lightning strike thrice with the recent RIMM debacle with the current gap?

RIMM, today, provides us with a very perplexing scenario.  Here we have, a successful company with great financial metrics but continues to underperform (trendlines were drawn prior to me giving up on their guidance or lack of)...

What is happening at RIMM?  From an employees' point of view:
- The first letter
- Then some more....

And how did the company respond?  You can read it here.

Which one should you believe in?  Are these just employees who are miserable and probably missed out on a promotion?  Or is RIMM really imploding inside?

How to play RIMM's tipping point?

Watch $25.82...thar she blows; add more on the short side.
Watch $31.00...she may be attempting to get some air (like the buyback program maybe?) before she decides to go down again...

20 day MVA would be the preferred stops if one was initiating any shorts at this junction.  At these levels, the gains on the short side wouldn't be as epic...

If the general employee sentiment is really as bad as the letters seem to suggest, RIMM will slowly erode over time.  At the time of writing, it is at $27.72; market willing, it should attract bottom fishers salivating over its fundamental ratios.  For those who aren't short...any bounce up (say in the $31nish) would provide an entry point for a ride down.

To summarize:

RIMM's problem is management. The fish stinks from the head down. Both CEO's should re-read "the emperor's new clothes"....RIMM will not vanish and implode overnight if it continues its path (they are still a force on the corporate side); they will however, loose their relevance over time if the symptoms persist.

Unless there are any material news going for it; I'd surmise that there would probably be buyers trying to fill up here due its perceived fundamental underpinings & stock buybacks.

Of course, your mileage may vary...

Update Dec 2011

Disclosure: I am short RIMM.