Research In Motion Ltd (BBRY): Worst Stock of the Year

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Research In Motion Ltd (NASDAQ:BBRY) basically came out and reported an awful quarter. The company under-performed to expectations, and as a result the share price fell by 27.8%. The under-performance is likely to continue going forward.

Earnings summary

The company’s total sales for the quarter grew by 15% year-over-year. The growth in sales was driven by improvements brought upon by its product refresh.

BlackBerry Ltd (NASDAQ:BBRY)

The BlackBerry Z10 and BlackBerry Q10 over promised and under delivered. The problem with the BlackBerry Z10 and Q10 was that even with the year-over-year sequential increase in advertising expenditures, the products themselves did not sell. The company ended up incurring an increase in its selling, marketing, and administration expense that was $150 million higher than the previous year. This was the primary contributor to the company’s lack of success, and it represented the lion's share of the $169 million operating loss that was reported for the quarter.

The company missed earnings expectation. Analysts on a consensus basis were hoping for earnings of around $0.08 per share; what actually happened was a $0.16 loss per share. The company missed earnings by a very large margin, which is what sparked the sell-off.

How bad is it at Research In Motion Ltd (NASDAQ:BBRY)?

The company provided absolutely no guidance whatsoever. The CEO wasn’t very confident in providing a prediction in a market where the company has absolutely no competitive advantage. The company’s products certainly weren’t spectacular. The CEO plans to release the BlackBerry 10 in new markets going forward, but with inferior hardware specifications, the company should be busy at work developing a product that keeps up with the product refresh cycles over at Apple Inc. (NASDAQ:AAPL), Samsung, and HTC. It doesn’t take rocket science to make it in the smartphone space.

So now we’re left to speculate on the future of Research In Motion Ltd (NASDAQ:BBRY). I believe that at some point, the company will only sell smartphones in markets where it is profitable and popular. Currently 43.7% of its sales come from Europe and the Middle East. If anything, a serious restructuring of the company’s business is to emphasize profit and sacrifice more than half of its revenue. Put an emphasis on marketing in one geographic region. Then put in place a more rapid product refresh cycle and build out a stronger application ecosystem.

Research In Motion Ltd (NASDAQ:BBRY) will have to become increasingly dependent on its other businesses (services and software). It isn’t in for any major turnaround anytime soon. What investors should do is sit back and wait until there’s a significant change in the overall momentum of the business.

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