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Where Does Research In Motion Stand?

July 25, 2012 | About:
Muhammad Bazil

Muhammad Bazil

3 followers
These are certainly rough times for the Blackberry Smartphone developer; Research In Motion (RIMM), with possibly even more difficult times still ahead. The 52-week low price for this equity is $7.14, approximately 21.3% of its 52-week high, which is $33.54. And, the latest in a series of bad news to hit the market regarding this stock is the announcement of the delay in the launching of the firm’s Blackberry 10, with RIMM planning on launching this new Blackberry 10 series sometime in the first quarter of 2013.

Other disappointing news that came as a result of the company’s first quarter earnings report include a lower revenue of $2.81 billion, compared to $4.91 billion in the same period last year, and a $518 million GAAP net loss. So the question that may be on the lips of many is: “Is there any silver lining for this stock?” Before going considering this, let's have a look at recent developments that are working against Research In Motion.

Revenue Decline

Although this has already been touched on in the previous paragraph, there is a need to go even further by taking a look at the decline in revenue for the period ended Feb. 26, 2011, as compared with the figures of this year, which ended on March 3, 2012. Regarding this, RIMM for the first time in nine years declined in total revenue or sales for the 2012 annual result. Also, the company even failed to meet the $3.1 billion that analysts expected for the first quarter earnings, earning instead $2.81 billion as previously stated.

It equally posted a $643 million operating loss as opposed to an $897 million operating profit posted in the same period last year. This only makes a bad situation worse. Interestingly, Apple’s (AAPL) revenue increases year over year are just about in line with RIMM’s declines year over year. You can say one company’s loss has been another company’s gain. This is a typical scenario in the world of business.

Loss in Revenue

It seems Research In Motion will be losing out as far as carrier fee earnings are concerned, since it may have to cut such fees significantly due to pressure from carriers. The situation is even made worse by the fact that the company expects to get about a third of its earnings or revenues from these fees during the current fiscal year. This means that revenue from carrier fees could drop to as low as $3.4 billion this fiscal year; a 17% drop and by 18% to $2.8 billion in the 2014 fiscal year according to Sameet Kanade, a Northern Securities technology analyst.

Fall in price of old phone models

Even as the world awaits the release of the new Blackberry 10 series, how soon this will happen nobody seems to know. But more immediately concerning is that old models of phones made by Research In Motion are currently being sold at reduced rates. This means that the upcoming quarters for the company will be pretty bad.

RIMM stock price decline since last year

Also, the stock price for RIMM is currently below $7, even going to as low as $6.57. But its price a year ago was around $30, registering a $33.54 high during this period. This just shows how bad things have gone for RIMM. So, any hope in sight? Below are at least two reasons why it may not be all bad news regarding Research In Motion.

A number of possible suitors

As the price of this stock continues to experience a downward spiral, a number of prominent names have emerged as possible buyers in the event that the company sells itself. This includes Microsoft (MSFT), Amazon (AMZN) and Google (GOOG). This is at least good news of sorts for shareholders.

A cash pile plus investments

The reason that many still hold to the view that Research In Motion will weather the storm is due to no other reason than its almost $2.25 billion worth of cash plus investments. This figure is higher than last quarter’s $2.1 billion on RIMM’s balance sheet. This cash pile is important as the company faces dwindling revenues in the coming quarters even though it is not experiencing a cash crunch right now.

In conclusion

If you are planning on buying RIMM stock, then you need to consider the fact that the negative news regarding this company is greater than the positive news. For now it might just be better to watch how things go before making a buy. It seems there’s not enough good news out there yet when it comes to Research In Motion for anyone to purchase this stock.

About the author:

Muhammad Bazil
Muhammad Bazil is a financial journalist and editor for a variety of websites, public policy organizations, and book publishers. He has written hundreds of published articles and blog posts on topics including budgeting, credit management, real estate and investing. His articles have been featured on the homepage of Yahoo!, MSN and numerous local news websites.

Rating: 3.0/5 (9 votes)

Comments

forexnutca
Forexnutca - 2 years ago
To me RIMM is a Graham stock with a small chance of turning into a Fisher stock....well worth the risk at this point. Kudos to Prem and the Fairfax team!

Disclosure: I'm Canadian

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