“There are downgrades, and there are downgrades, but I have never seen the kind of downgrade parade marching through Wall Street this morning related to Research in Motion and its stock,” Jim Goldman reports for CNBC.
“The company’s second quarter earnings were disappointing, but RIM’s guidance was downright depressing. Margins will be squeezed, new subscriptions aren’t measuring up, and the sales and marketing expenses appear to be dramatically out of whack as this company tries to sell the variety of new BlackBerrys in its product pipeline,” Goldman reports.
“RIM spent that surprisingly huge $380 million to market all this stuff. And Wall Street is none too pleased. These downgrades this morning are so steep, so strong, so fast that they carry a negative G-force,” Goldman reports. “Cannacord Adams took its target from $185 to $72.50. RBC went from $165 to $90. Credit Suisse went from $100 to $80. These are brutal. RIM shares are in meltdown.”
“How did the Street, indeed so many of us, get this one wrong?” Goldman asks.
MacDailyNews Take: Not reading MacDailyNews frequently enough? Which part of “bloodbath” did you guys not understand?
Goldman continues, “The trouble for analysts and investors: no one knows how RIM will price new products. And when those prices come in far lower than expected, they contribute to earnings misses, kill margins and slash average selling prices. That’s a big problem for companies selling a variety of handsets across a number of smart phone sub-sectors. This indeed could be a harbinger of similar problems for Nokia.”
Goldman reports. “But not Apple. iPhone pricing is set. It doesn’t change until Steve Jobs announces a price change. With iPhone pricing, you know what to expect… If the market is there, and Apple meets or beats iPhone sales projections, today’s sympathy slide with RIM shares could mark a significant opportunity. Again.”
Full article – recommended – here.
[Thanks to MacDailyNews Reader “JES42” for the heads up.]
“It’s kind of one more entrant into an already very busy space with lots of choice for consumers,” RIM Co-CEO Jim Balsillie said of Apple’s iPhone on February 12, 2007. “But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.”
Research in Motion (RIMM) is currently down $23.91, or 24.51%, to $73.62 on heavy volume of 32,537,859 shares.