RIM Earnings Preview: It's Going to Hurt

Tickers in this article: AAPL GOOG MSFT NOK RIMM S T VZ

NEW YORK (TheStreet) -- Research In Motion's upcoming earnings release will likely confirm investors' expectations that it was the worst-performing quarter ever for the Ontario smartphone maker.

Research In Motion is a world leader in the mobile communications market and has a history of developing breakthrough wireless solutions. The company was founded in 1984 and is headquartered in Waterloo, Canada. Research In Motion Limited trades an average of 14.8 million shares per day with a marketcap of $5.4 Billion.

Research in Motion's price per share has dwindled to $10 today from $140 three years ago.

RIM is anticipated to report effete first-quarter earnings after the market closes on June 28. The consensus estimate is currently -2 cents a share, a decline of $1.35 (101.5%) from $1.33 during the same period last year. Revenue is falling; investors are expecting $3.15 billion, off $1.76 billion compared to $4.91 billion during the first quarter of last year.

The trailing 12-month price-to-earnings ratio is 3 (yes, that 3 is correct), the mean fiscal-year price-to-earnings ratio is 24.05, based on earnings of 43 cents per share this year.

In the last month, the stock has fallen -6.85%, down about 65% from a year ago.

From the penthouse to the outhouse: Reported revenue was $19.91 billion last fiscal year compared to $14.95 billion in the year before. The bottom line shows rising year-over-year earnings of $3.41 billion last fiscal year compared to $2.46 billion in the previous year. It will take more than an enthusiastic consumer response in BB10 to relive those numbers.

Even without RIM's new CEO Thorsten Heins providing investor warnings, we know this one is going to leave a mark. Almost all weakness should be set at the feet of former co-CEOs Mike Lazaridis and Jim Balsillie for allowing BlackBerry 10 to fall behind schedule as far as it has. The delays are incogitable, while Microsoft , Google and Apple are leapfrogging each other non-stop.

Microsoft didn't bring down the house of RIM; however, Apple and Google ripped apart RIM like Sidney Crosby lacerates ice during the third period of a cup game, while down by one. Nokia's multitudinous problems also haven't thwarted the Finish company from nipping at the heels of RIM.

Apple has negotiated agreements with Sprint , Verizon and AT&T , the three largest carriers, to sell a minimum number of iPhones in order to keep their Apple franchises. Apple's clench on the market is so consummate, that the deal struck with Sprint caused investors to question if Sprint gave up too much to Apple. It may be early to bring back the jury, but in the short period Sprint has carried iPhones, it appears it has taken market share away from both Verizon and AT&T.

How much market share was lost from RIM to Apple, as the three largest carriers focus on iPhone sales, is hard to know for sure, but it's difficult to make a case RIM didn't suffer. We can expect Sprint, Verizon and AT&T to carry the new BB10 phones when released, but we can't expect carriers to push them. AT&T has the Nokia Lumia locked up and is likely to keep on pushing it. Sprint must keep running to meet its obligation to Apple, and Verizon may play hardball with RIM knowing what the competitive landscape currently is.

If BB10 is truly fantastic, as in "iPhone has Lumia's baby" fantastic, RIM may turn it around after two or three quarters. Even "pretty good" will not be strong enough.

RIM's short interest has remained elevated for months. Currently near 14%, with more than 66 million shares short, RIM clearly has a lot of smart money still betting against it. The latest reporting period by Nasdaq is May 31, 2012, and with over four times the average daily trading volume, the latest number is the highest number of shares shorted in the last 12 months (probably ever). I count a total of six weeks out of the last 52 with shares short over 60 million and four of them are in May.

At the end of the day, I still maintain CEO Heins will find a buyer. If the shares continue falling at the current rate, it may soon be cheaper to buy the whole company than a new BlackBerry phone. If you're looking to buy or add on RIM while the shares are "cheap," take a look at the options. The premium is high and if you can time the release of BB10, it may turn into a very nice trade.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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Tickers in this article: AAPL GOOG MSFT NOK RIMM S T VZ