Buy Research in Motion (RIMM) as shares tumble on Q4 EPS warning?

Posted Feb 11th 2009 11:10AM by Melly Alazraki
Filed under: Earnings Reports, Forecasts, Apple Inc (AAPL), Research in Motion (RIMM)

Shares of Research In Motion (NASDAQ: RIMM) are tumbling some 15% to well below $50 a share this morning after the smartphone maker updated its fourth-quarter guidance numbers.

RIM said that it expects a 20% jump in net subscriber account additions. The BlackBerry maker also reaffirmed its financial guidance for the fourth quarter and expects revenue for the quarter to be at or near the mid-point of the previously guided range. But -- and herein lies the problem -- it also expects to report Q4 gross margins and EPS at the low end of the company's previously issued guidance.

So, as RIMM shares sink some 15%, is the market overreacting and is this a good time to move into the stock?

It's a tough one to crack as traders seem to punish some stocks more than others. How many times have iPhone maker Apple Inc. (NASDAQ: AAPL) shares been pounded, only to rebound even during the same session? In fact, how many times has that happened to RIMM too?

Normally I'd say take advantage of today's dip, but ever since RIM launched the BlackBerry Storm, I have my doubts. RIM rushed into the market with the Storm, and if this product was supposed to establish the company in the consumer market, then it made a mistake -- even if it had a very good holiday season with the phone.

What's more worrying is the decline in its more powerful signature phones. RIM said that the product mix changed, probably meaning it sold more lower margin phones than it expected and less of the higher margin ones. If businesses are cutting that much and since the economy isn't making any signs of improving any time soon (stimulus or not), this is a worrying factor.

Still, the company is in a good financial position, and compared to others it's still a phenom. If investors believe in its long-term prospects, not doubt then, they should take advantage of today. Otherwise, if they're like me, they might want to stay on the sidelines a while longer.

Tags: aapl, inthenews, rimm

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Reader Comments (Page 1 of 1)

2-11-2009 @ 2:51PM

ryan said...

This company is in a pretty stable financial position but you have to be in RIMM for the long run as its an extremely volatile stock. Their price drop has been pretty drastic today but I think investors are still cautious because sentiment is actually bordering on bullish (http://www.predictwallstreet.com/forecast.aspx?symbol=RIMM) and I would of expected it to drop drastically with a 17% price drop today. The market either seems to overreact to this kind of news or shuffle it into the barrel of all the other bad news these days.

2-11-2009 @ 9:19PM

Beltway Greg said...

It's one dimensional and the moat is dry. Face it, Apple caught the tech world so flat-footed with the IPhone that the other companies are about 3-4 years behind. Apple's run has just begun. So adaptable, so flexible, and the world's best Netbook.