While those names could sound tempting for investors who may think they are cheap, BusinessWeek's Karyn McCormack reminds us that not everything that is cheap is a good bargain, and there are some risks that need to be taken into account.
One common problem for most of these stocks is that they trade under $10 for a reason. That reason is usually hardly any earnings growth, if any at all. And with a weak economy, these companies would have an even harder time to stimulate growth. Add to the mix the fact that institutional investors don't like to touch stocks under $10 and the potential for recovery is not good.
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
I've said it before: the second quarter is going to be the inverse of the first. Expectations going in were simply too high.
What I find interesting is that Oracle (NASDAQ: ORCL), Red Hat (NYSE: RHT) and Research In Motion (NASDAQ: RIMM) have all taken down guidance due to the sluggishness they're starting to see in their businesses.
What the Street seems to be ignoring is that the dollar has been crushed for over a year now, which means that the currency tailwind is only getting weaker as the year drags on. If one uses $1.55 euro per dollar as a benchmark, the second-quarter effect was a 14% year-over-year currency tailwind.
In the third quarter, that drops to 10%; in the fourth, it will drop to 5%. Add in macroeconomic headwinds -- along with the fact that credit markets have been pushed back into a state of mild panic -- and it's a surefire recipe for a very tumultuous back half of the year.
I'm looking hard for reasons to be optimistic, but they seem to be thin on the ground. In the information technology (IT) sector, at least, we'll likely see a meaningful budget flush at the end of the year - if only because they'll be cut in a big way starting in 2009. This means that IT managers, if they even think they might need anything over the next year or so, need to use or lose whatever's left in their 2008 budgets come the fourth quarter.
This will create an environment where people will be calling the bottom for IT in the fourth quarter - but it's more likely to be the last hurrah before the bottom drops out.
Welcome to the Research In Motion first quarter fiscal 2009 results conference call. (Operator Instructions) I will now turn the conference over to Ms. Edel Ebbs, Vice President, Investor Relations. Please go ahead.
Edel Ebbs, Vice President, Investor Relations
Thank you. Welcome to RIM's fiscal 2009 first quarter results conference call. I'm Edel Ebbs, RIM's Vice President of Investor Relations. With me on the call today is Jim Balsillie, RIM's Co-CEO, and Brian Bidulka, RIM's Chief Accounting Officer.
After I read the required forward-looking statements disclaimer, Jim will provide a business and strategic update. Brian will then review first quarter results, and I will discuss our outlook for the second quarter of fiscal 2009. We will then open the call up for questions. I would like to note that this call is available to the general public by a call-in number and webcast. A replay of the webcast will also be available on the RIM.com website. We plan to wrap up the call before 6:00 PM Eastern this evening.
Net income at the Ontario-based company in the fiscal first quarter rose to $482.5 million,or 84 cents per share, versus $223.2 million, or 32 cents per share, a year earlier. Revenue soared 107% to $2.24 billion as the company shipped about 5.4 million devices. Though these results were impressive, they were not good enough for Wall Street.
Analysts surveyed by Bloomberg News were expecting RIM to report earnings of 85 cents on revenue of $2.27 billion. Moreover, the company forecast second quarter profit of between 84 and 89 cents per share, missing the Bloomberg estimate of 92 cents. The revenue forecast of $2.55 billion to $2.66 billion, however, is slightly better than the $2.44 billion analysts had expected.
The problem that RIM has is that it's not Apple Inc. (NASDAQ: AAPL), which is now trying to lure more corporate customers with the latest version of the iPhone. In baseball terms, RIMM is like the New York Mets, a once mighty team that has fallen on hard times. Apple, on the other hand, is the high-tech world's equivalent of the Boston Red Sox, a once lowly team that now dominates the league.
Picture that the RIM team and the Apple team are playing each other in a real baseball game. RIM is trailing Apple in the bottom of the ninth, the bases are loaded with two outs. RIM management is trying to convince investors that it can hit a home run in this situation, while Wall Street is sure the company will strike out.
RIMM shares are down over 8.5% in after-hours trading to about $130. It closed at $142.336.
RIMM is scheduled to report Q1 EPS today after the market close. RBC Capital has a Outperform rating on RIMM.
RIMM call option volume of 81,369 contracts compares to put volume of 76,284 contracts. RIMM July option implied volatility of 63 is above its 26-week average of 55 according to Track Data, suggesting larger price movement.
The stock is up 150% over the last year but with its move into the consumer marker BlackBerry maker Research in Motion Limited (NASDAQ: RIMM) is entering the fickle world of consumer trendiness, reported the Wall Street Journal's "Heard on the Street". Analysts are concerned about how big the consumer market can be for them, and then there's Apple Inc (NASDAQ: AAPL) and Nokia Corporation (NYSE: NOK) beating down the consumer path. Smart products will help, but price is an issue, and the shares could face a hard fall.
The Wall Street Journal reported that Wachovia Corporation (NYSE: WB) acknowledged it has hired The Goldman Sachs Group Inc (NYSE: GS) to study its troubled portfolios of mortgages, a move which many believe indicates the bank is gauging the market value of the loans in order to eventually sell them.
OTHER PAPERS:
Lazard Ltd (NYSE: LAZ) was hired by UBS AG (NYSE: UBS) to undertake a strategic review of the Swiss bank's businesses, the New York Post learned.
The New York Post also reported some reported turmoil at Live Nation Inc (NYSE: LYV), following the abrupt departure of the concert promoter's chairman, Michael Cohl. Employees in the unit that was led by Cohl fear that the company will lay some of them off, and CEO Michael Rapino is accused of not being strongly committed to the company's mega-deal strategy.
The Boston Herald reported that its unions were told the newspaper will lay off 130 to 160 workers, under its new plan to outsource printing operations elsewhere in the state.
Research in Motion (NASDAQ: RIMM) is recently down $3.18 to $144.37. RIMM is scheduled to report Q1 EPS on June 25. Morgan Keegan says: "we expect another strong quarter from RIMM, driven by $99 price points and successful launches of the CDMA curve." RIMM July option implied volatility of 58 is above its 26-week average of 54 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Research In Motion (NASDAQ: RIMM) is a leading provider of wireless communications hardware, software and services. Company devices allow access to email, telephone, messaging, Internet and intranet-based applications. RIM products include the BlackBerry wireless platform and the RIM Wireless Handheld product line. The firm also provides software development tools and makes radio-based modems that other manufacturers incorporate into their portable devices. Competitors include Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Nokia (NYSE: NOK).
The stock is up more than 40% over the past three months, in response to such issues as better than expected Q4 results, upside guidance for Q1, research showing a mobile email explosion, continued penetration of worldwide markets, and the release of details regarding the BlackBerry Bold 3G cell phone due this summer. Seven brokerages reiterated their "buy" recommendations over the period. The average price target was nearly $160.
According to internal company and agency documents, the Wall Street Journal reported that the FAA is investigating into why AMR Corporation's (NYSE: AMR) American Airlines ordered mechanics to skip specific safety instructions to detect damage to planes from potential lightning strikes.
Yahoo! Inc (NASDAQ: YHOO) is trying to quickly put the finishing touches on a search advertising deal with Google Inc (NASDAQ: GOOG) as billionaire Carl Icahn launches a proxy fight for control of Yahoo's board, according to the New York Post. Yahoo! hopes to announce a deal with Google to create an open platform system within the next week, two inside sources said.
The New York Post reported that a partnership of MGM Mirage (NYSE: MGM) and investment company Dubai World may seek to buy the Drake Hotel site from developer Harry Macklowe. If a deal is reached, MGM and Dubai World would assume $580M in defaulted debt and interest, inside sources said.
Looks like Microsoft Corp. (NASDAQ: MSFT) will be working with longtime nemesis Research in Motion Ltd. (NASDAQ: RIMM) to bring its Windows Live services to the BlackBerry mobile platform. Windows Mobile, the smartphone operating system made by Microsoft that is a direct competitor to RIM's BlackBerry smartphone operating system, is already integrated with Microsoft's Live services, naturally.
While RIM figured out long ago that instant access to secure email in a small, portable device was the key to its fortune, Microsoft took years to discover that same fact, and now provides a similar solution on its Windows Mobile platform. But providing access to Windows Live to the biggest competitor it has in the smartphone arena can mean only one thing: Microsoft is trying to fend off Apple Inc.'s (NASDAQ: AAPL) iPhone.
At the same time, Microsoft wants to get as many customers using its Windows Live services on those mobile phones as possible. The iPhone reportedly will shortly work with Microsoft's Exchange corporate email servers to allow the same "push email" functionality that put the BlackBerry on the map. That is, instant, real-time email wherever you are. Those with Microsoft's Hotmail email service will also enjoy real-time "push" email with this new partnership. But make no mistake -- RIM and Microsoft will need to do more to fend up the upstart competitor, Apple. If a new iPhone is announced this summer as expected, both RIM and Microsoft will see even more turbulence in the mobile markets.
RIMM announced the introduction of BlackBerry Bold smartphone.
Smith Barney says: "We expect its 3G capability will help drive strong international growth for RIMM. We expect AT&T (NYSE: T) will be the first domestic carrier to offer the Bold."
RIMM call option volume of 77,745 contracts compares to put volume of 45,526 contracts. RIMM June option implied volatility of 45 is below its 26-week average of 57 according to Track Data, suggesting decreasing movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Yahoo! Inc (NASDAQ: YHOO) is going to let outside developers create applications across its network of sites, the New York Times contended. The search engine is also going to combine its online services under the social profile concept in an attempt to allow its users to replicate the social experience that social networks like News Corporation's (NYSE: NWS) MySpace and Facebook have made so popular.
WEB SITES:
Research In Motion Limited (NASDAQ: RIMM) will reportedly delay the launch of its new hotly anticipated 3G BlackBerry phone, Fortune reported, which the company is developing for AT&T Inc (NYSE: T). The phone, originally supposed to be launched in June, may not be released until as late as August, inside sources said.
Research In Motion (NASDAQ: RIMM) is a leading provider of wireless communications hardware, software and services. Company devices allow access to email, telephone, messaging, Internet and intranet-based applications. RIM products include the BlackBerry wireless platform and the RIM Wireless Handheld product line. The firm also provides software development tools and makes radio-based modems that other manufacturers incorporate into their portable devices. Competitors include Microsoft (NASDAQ: MSFT), Motorola (NYSE: MOT) and Nokia (NYSE: NOK).
The company surprised the Street earlier in the month, when it reported Q4 EPS of 72 cents and revenues of $1.88 billion. Analysts had been looking for 70 cents and $1.86 billion. Management also guided Q1 EPS to 82-86 cents (76 cent consensus) and Q1 revenues to $2.23-$2.30 billion ($2.02B consensus). In discussing the solid numbers, the firm noted that heightened retail activities helped drive exceptional subscriber growth during the quarter. Oppenheimer, Lehman Brothers and Caris subsequently reiterated "buy" recommendations on the stock and declared price targets in the $135-$150 range.
"The more I look at Apple (NASDAQ: AAPL) and its new iPhone, the more I consider it to be, perhaps, the most innovative and transformative company in mobile computing today," notes wireless sector expert Nikhil Hutheesing.
The editor of The Forbes Wireless Stock Watch explains, "Put simply, iPhone is a game-changing product, and we are now making the case for investors to buy the stock."
"When Apple first announced its move into the wireless PDA business - in January 2007 when it introduced its iPhone - there was skepticism over whether it would be able to grab market share from incumbents like Research In Motion, which makes the BlackBerry smartphone and Palm which makes Treo handhelds.
"Nobody is doubting Apple today. Steve Jobs' iPhone is in the hands of over four million people and it is now the number two smartphone in the business with a 28% market share. It has surpassed Palm and is nipping at the heels of RIMM's BlackBerry.
"Until recently, iPhone, like Apple's Mac has been a fairly 'closed' universe. It was a great consumer device but it had little presence among large corporate users, the so-called enterprise market. That all changed in March.
Research in Motion (NASDAQ: RIMM), the company behind the super popular BlackBerry messaging device, delivered strong forecasts that topped what analysts were expecting. In spite of what many fear to be a very dour situation for technology companies, and particularly those focused on the consumer electronics, RIMM put up some very impressive numbers, propelling the stock upwards in pre-market trading.
Instead of paring back spending, consumers seem to be continuing its spending (at least on Crackberries) as the company reported that it had nearly doubled its revenues in the last year.
There are now officially 14 million RIMM devices out there. ``The BlackBerry has moved from being an enterprise tool to being something that soccer moms are using," said one analyst interviewed by Bloomberg.
As armchair analysts, we should ask ourselves why does RIMM continue to perform even in the face of recession/depression/chicken-little-sky-is-caving-in scenarios?
I think obsession is the word to describe it.
Readers should be intrigued to know that the BBC reported that mega-star Madonna "sleeps with her BlackBerry" under her pillow, just in case she "remembers something during the night."
Um, ever heard of paper and pen?
For those addicted to the aptly-nicknamed Crackberry, they just can't stop. Try to get their attention over dinner? Sorry, their shifty eyes are always glancing down. Want a quiet, intimate time alone with the family? Oops, I forgot, someone is attached by what I call "the world's longest leash."
And what if that someone is yours truly? Guilty as charged...
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
The weak market conditions have caused many stock prices to fall under $10. Not only smaller -- and perhaps lesser known -- stocks trade under $10 these days, but also some big and famous names such as Ford Motor Co. (NYSE: F), Motorola Inc. (NYSE: MOT), Sprint Nextel Corp. (NYSE: S), Washington Mutual Inc. (NYSE: WM) and Del Monte Foods (NYSE: DLM), as well as many airline companies like Northwest Airlines (NYSE: NWA) and JetBlue (NASDAQ: JBLU). 
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit 
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