Tuesday, October 18, 2011

How strange is RIMM?

During the years I have observed some strange moves in stocks, I have seen stocks like NFLX and AOL skyrocket to the moon, make some investors money (like me) and I have also seen stocks like Enron (I forgot the symbol:-) and WCOM lose people money (me again), but every once in a while a value play comes around and makes one wonder if they know how to invest at all. I believe the strangest company stock to me is Research In Motion (RIMM). I have owned this stock over the years and luckily sold it at a small profit, but why did I sell it? I think a bigger question is---would I buy it again? Let's look a little deeper, shall we?
  • RIMM has a market cap of about $12 billion.
  • RIMM has a P/E of between 4 and 5
  • RIMM has over $1 billion in cash
  • RIMM has no debt
  • RIMM has revenue of close to $20 billion a year
Wow, looks like a strong company, but then why is the stock tanking? I think the answer to this question is simple, RIMM is no longer the leading smart phone, any investor can see that Google's (GOOG) Android phones and Apple's (AAPL) iphone have taken market share away form Research In Motion's Blackberry brand---remember at one time they were the "smart" phone just a little over three years ago. The bad news does not just end here for RIMM, though. RIMM's earnings are not growing double digits anymore, last quarter they reported EPS of $0.88 a share which was well below the $1.33 a share they reported in June. For the next quarter RIMM's EPS estimates range between $1.00 and $1.35. There is simply no growth in this company at this time. In addition, Research In Motion has had service problems just this past week. RIMM's stock is trading below its 50-day moving average (around $26) and its 200-day moving average (around $35), so technically it has broken down.

The bottom line is that RIMM is certainly a strange one that I would stay away from.


  1. I would not at all be surprised to hear if Google makes a bid for them. They are a distant third next to Android & Apple and are losing ground more and more each day. After this latest outage, which hurt the company at the worst time imaginable....all they could do to ease the pain of the customer was to offer them free apps which probably nobody even wanted for the low low low low cost of FREE.

  2. Joseph, who was the individual that told you to exit RIMM at $58? The stock is a pure buyout play at this point and nothing more, in my opinion. Very sad how they went from first to almost last in the smartphone market in just about three years but such is technology! It really seems as if the two co-founders and current co-CEO's have no clue about what is going on around them. Dolby Labs is eerily similar . . .