RIM Now Sees Operating Loss, Small Hope For a Sale

Research-in-Motion Ltd. (NASDAQ: RIMM) was halted on NASDAQ trading after the close for ‘news pending’ after rumors had been out of more layoffs heading its way.  The company has now issued a “business update” despite the notion that it is not offering quarterly guidance any longer.  As you might have expected, today’s halt is for a further deterioration of its core operations. The warning is actually far worse than even the worst expectations (this soon, anyway).

The CEO noted, “The ongoing competitive environment is impacting our business in the form of lower volumes and highly competitive pricing dynamics in the marketplace, and we expect our Q1 results to reflect this, and likely result in an operating loss for the quarter.”

The company has also announced that hired J.P. Morgan and RBC Capital Markets as financial advisors and that might make some hope that RIMM can find a buyer.  This should have been done one year or longer ago.

The operating loss is where the devastating news is.  We have been expecting this for some time as that “value” it has been screened as was nothing short of a value trap. Thomson Reuters is at $0.43 EPS for the current quarter and at $1.90 EPS fo the fiscal year-end of FEB-2013.  Those estimates will look silly now as the losses are coming on faster than most analysts were expecting.

While Wall Street generally loves layoffs, this cannot be any good harbinger for growth ahead and you can ask how successful RIM has been at selling itself to investors as a value stock.

RIM shares closed up by 2.1% at $11.23 today and the 52-week trading range is $10.57 to $43.59.  Don’t forget that this stock was much higher over the last two-year period.

JON C. OGG