Research In Motion Limited (RIMM) reported disappointing sales and lack luster forward guidance Thursday afternoon. They still just don’t get it.
The maker of the world-famous Blackberry phone, reported disappointing quarterly sales and lack luster forward guidance. They still just don’t get it. In the world of technology, your stock price is only as good as the promise of future innovation. When you fail to innovate, it signals the beginning of the end of the growth cycle of a company. For the past two years RIMM has failed to come up with anything that is truly new. As a result of this, the shares have fallen dramatically.
Now, with the most recent earnings reported Thursday, September 15, the stock is under significant pressure once again. Their solution, to show that there is a “significant software upgrade” coming soon. Oh big deal. It’s expected that a manufacturer of a technologically based device would issue upgraded software. This isn’t earthshaking news. This isn’t something that’s going to make the consumer want to buy a Blackberry.
RIMM said in its earnings statement that its playbook sales were half of what was expected. No kidding. Have they noticed that the Apple iPad is the industry leader? Maybe they should look to find something new to bring to the marketplace rather than playing copycat with other manufacturers.
So what does this mean for equity and options traders? In short, more of the same. Research In Motion is not giving us a reason to bid up the price of their stock. It makes sense then that the logical direction is stagnant to bearish. There are many option strategies that can be used to profit from this expectation. Put calendars, put diagonals, bear calls all makes sense. There is, of course, one potential fundamental game changer. That is that some other Corporation may look to buy research in motion. If that comes to pass, watch out. The stock will quickly move to much higher values. Therefore, if you are going to trade RIMM bearish, have your secondary exits well-planned and if necessary, capital on reserve to follow through.
In conclusion, Research In Motion did what it has done best for the past year and a half: disappointing the investment community. Until we start to see something truly new and different from the maker of the BlackBerry phone, I see no reason to be bullish on RIMM. Gold perhaps, Research In Motion, no.
Jeff McAllister
OptionsANIMAL Instructor
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