The Death of R-I-M Earnings… From Value to Value Trap (RIMM, AAPL, GOOG)

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Research-in-Motion Limited (NASDAQ: RIMM) should change its name to ‘RIM’s Limited.’  The smartphone maker is turning out to be a ‘dumbphone’ maker if you look at industry figures.  Still, what is interesting is that ANYONE is actually surprised and disappointed in the numbers being lower and lower.  The reality is that RIM has just become almost irrelevant against Apple Inc. (NASDAQ: AAPL) for the iPhone and against Google Inc. (NASDAQ: GOOG) for the Android phones.  Even the fact that RIM has the best security does not seem to matter.

As far as the last quarter, RIM earned $1.27 EPS and sales were $5.2 billion.  Thomson Reuters had a consensus estimate of $1.19 EPS and $5.27 billion.  Net income was actually $0.51 EPS after items.

For the coming quarter, RIM gave guidance of $0.80 to $0.95 EPS on sales of $4.6 to $4.9 billion and the consensus estimate for the coming quarter is $1.18 EPS on $5.12 billion in sales.  Really, can anyone be surprised?  As far as shipments  RIM is targeting 11 million to 12 million shipments as well and gross margin percentage for the fourth quarter is expected to be about 38%.

We noted in our full preview that the next quarter estimates just seemed too high.  It seems that too many Wall Street analysts are stuck still using corporate Blackberry phones rather than iPhones or Android phones and are mistaken that they cannot get out of using them any longer.  We also noted that if those estimates were right that RIM would be trading at less than 4-times earnings.  Usually when you see that it the translation is “value trap rather than a value stock.”

RIM claimed, despite its challenges, that its total BlackBerry subscriber base grew to almost 75 million customers around the world.  That would be “75 million suckers” if you look at the market share trends each month regarding smartphones.

As far as any changes at the top, it doesn’t look like it.  If RIM continues to fall, perhaps the next shareholder class action suit will be a grudge cage match between the co-CEOs Jim Balsillie and Mike Lazaridis where the loser goes.

RIM hit a new 52-week low of $14.80 today and closed up 0.3% at $15.13 on the day.  The after-hours has yet a new low of $14.20 after a 6% drop. 

JON C. OGG