Research In Motion Limited (NASDAQ: RIMM) is perhaps going to be the most widely followed earnings report for this week out of the known companies due to report. The troubled smartphone maker is set to report on Thursday after the close of trading and it is safe to say that the old “value stock at just 4-times earnings” no longer applies. Not by a long shot.
We argued for months and months that the cash balance, the number of subscribers still in the base, and the positive earnings at the time were not relevant because the long-term trends were all that mattered. The competition from Apple Inc. (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG) have just overwhelmed the company’s market share in smartphones. The company has also faced massive internal pressures after so many mistakes have been made. Now RIM does not even operate profitably.
What makes this week’s report so critical is that RIM shares hit a 52-week low (also a multi-year low) of $6.22 on Monday. Its short interest as of the end of August remained very high at 87.479 million shares. While that is not a record in the nominal short interest, this was a record on the days to cover ratio of almost 7.3 days.
Thomson Reuters has estimates of -$0.47 EPS and $2.49 billion in sales. That is down from $0.80 EPS a year ago and the revenue decline is a whopping 40% from a year ago. For the following quarter which we are already in, RIM is expected to post earnings of -$0.42 EPS on $2.3 billion in sales.
About all that the investment community can hope for here is that the estimates have been brought down so much that RIM might still be able to say “See, things are not quite as bad as you expected.” That is still not very comforting but that is how investing and trading around news can be sometimes.
To put this in perspective, the last time that RIM shares were this low was all the way back to September of 2003. When a fad changes it can be brutal to those companies which miss the turn.
RIM is one of our ten brands that are likely to disappear in 2013.
JON C. OGG