RIM's Cheap

RIM is selling at 9 times this year's earnings and 8 times next year's. For most S&P 500 companies, that valuation would signal a screaming buy — but not in the face of slowing growth.

The question that is critical for RIM, Amazon

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[NFLX  Loading...      ()   ], Apple or any high-growth company is what is the future growth rate for the next five years.

If it's straight up, you get an Amazon-like multiple. If it's flat, you get a much lower one. The market is signaling that the BlackBerry will be a niche business user tool in the future. It's not cheap, if it's going to see shrinking device volumes and contracting multiples.

A New Operating System

RIM bulls seem to acknowledge that their operating system (OS) has been vastly inferior to iPhone and the (still buggy) Android OS. But they pin their hopes on the new OS 6 coming out later this summer. It looks better and it might breathe some temporary new life into the shares for a few days, but ultimately it won't solve the problem of a lack of applications running on BlackBerry.

IPhone now has over 200,000 apps built for it; Android has 70,000 apps (and rising); BlackBerry (as of this time last year) had a whopping 2,000 apps. If you were an app developer, where will you spend time building a new app?

Exciting New Devices

On the last earnings call, RIM co-CEO Jim Balsillie was curiously confident in talking about RIM's future. He talked cryptically about how the new devices being worked on by RIM's engineers were going to excite customers.

He promised we'd see some later in the summer. The potential "game-changer" he's likely referring to is the Slider (which has had supposed photos leaked out on the Web like this one). It's going to combine a large touch screen with the unique RIM keyboard. This is a perfect example of how engineers think.

Cram more features together in one device. It's obvious that the phone looks large and clunky. These kinds of slider devices have been tried and have failed.

In my opinion, most consumers are likely to prefer the more intuitive and elegant iPhones and Android devices. If users are already complaining about the Motorola Droid's size, how are they going to like the Slider?

The bottom line is that RIM is heading quickly towards a niche device classification with a smaller price-earnings ratio as a result. No amount of Bolds, Storms, Sliders or RIM tablet devices are going to save them, either.

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Disclosures:

Disclosure information was not available for Jackson or his company.

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