The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

26 September 2008

How quickly the (formerly) mighty decline! reports...
Research In Motion/RIMM, maker of BlackBerry devices, posted solid second quarter revenue growth of 88% and net income growth of 72%. However, the company's results and outlook failed to live up to Wall Street's high expectations.

Shares of RIM are down 20% in premarket trading -- Wall Street tends to punish a stock with a premium valuation relative to peers that fails to live up to expectations.

For the second quarter, total revenue came in at $2.58 billion, compared to the consensus estimate of $2.60 billion. RIM earned $0.86 per diluted share, falling a penny short of estimates.The Waterloo, Ontario-based firm's third quarter outlook is what is causing most of the investor disappointment. The company forecasts revenue of between $2.95 billion and $3.10 billion, which tops the consensus estimate of $2.94 billion. However, earnings are expected to come in between $0.89 and $0.97 per share, which falls below the $0.98 per share consensus estimate. The lower-than-expected earnings forecast is due to the expectations of tighter margins in the third quarter, with the company citing sector specific trends -- Q3 margins are forecast at 47.0%, which is well below the 50.1% average analyst estimate and the 50.7% seen in the second quarter.

Including premarket losses, RIM is down 48% from its 52-week high.
(begin dmg)
And so another former Core Opportunity bites the dust.

Although I believed the stock pointed to $75 when we sold back at ~$125, now that the stock has achieved that price level (and then some), the stock seems likely to decline even lower yet.

RIM finds itself in a heavily-hyped product transition, and has failed already to meet self-imposed deadlines for its new products. Moreover, this is an especially inauspicious moment (difficult consumer markets) to effect the transition, even if their competition (Apple/AAPL, Nokia/NOK, Samsung, et al) were not the formidable foes they are.

Full Disclosure: Sold all shares several months ago, and retain zero investment interest in RIMM.
-- David M Gordon / The Deipnosophist

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