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Research In Motion's Real Outlook? Grim
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Senior Contributor to TheStreet
Since the initial shock of Research In Motion's disappointing quarterly earnings numbers last month, a number of investors have tried to call a bottom and point out how cheap are the company's shares. They shouldn't.
Although the stock [RIMM
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] could see a slight short-term rally from here, expect the shares to come under renewed pressure in the fall.
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AP Blackberry Curve |
(Update: After this story was written, RIM shares were driven up on speculation that the firm will announce a new touchscreen BlackBerry.)
On June 24, RIMM shares took a dive after it announced its earnings. They sold-off from $58 pre-earnings to just below $48 on July 6. Since then, and timed with the general market rebound, the stock price has recovered to $55.
Amidst the sell-off, there were many RIMM bulls who made the rounds on television talking about how "irrational" the market's negativity on the stock was. Here are some of the arguments they made at the time in defense of the stock and why these arguments don't hold water.
Lofty Sales Projections
RIMM sold 11 million devices in its most recent quarter and surpassed the 100 million mark for BlackBerrys shipped. The RIMM bulls find it hard to fathom that a company selling so many devices will not continue selling the same number on an ongoing basis.
I have one retort to that point: Remember the RAZR by Motorola [MOT
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]? RAZR, of course, was a runaway success of a phone for most of the last decade.
The iconic phone, which was introduced by former Chief Executive Ed Zander in 2004, enjoyed a great four-year run and sold 110 million units over that time. But no one uses a RAZR today.
I'm not saying BlackBerrys will disappear in two years, but it is clearly on the decline, as RAZR was in late 2007. With all the speculation about whether Apple will have difficulty surpassing the $250 billion market capitalization size, no one has yet asked: will BlackBerrys hit a wall after they ship their 110 millionth device like RAZR did?
Data is a real-time snapshot *Data is delayed at least 15 minutes
