Is Research In Motion Limited (RIMM) Worth Investing In Again?

We can’t discuss RIM and the rest of this industry without mentioning Google Inc (NASDAQ:GOOG), the maker of the market-leading Android operating system. The search giant saw weakness earlier this year on a 3Q earnings miss of 15%, but has since recovered on renewed optimism concerning its mobile advertising potential. Additionally, a diverse product portfolio should help Google counter the weakness in its recently-acquired Motorola Mobility brand. Google is one of the top ten stocks loved by hedge funds, and has a host of billionaires as investors including Ken Griffin, Ken Fisher and Jim Simons (check out Jim Simons’ top bets).

Nokia Corporation (NYSE:NOK) is a fellow phone maker that has seen a steady decline in stock price and market share since the end of 2007. This selloff is in part due to a weak economy, but may be equally a result of market share “attacks” from the likes of Google and Apple. Nokia boosts a market cap double that of Research In Motion at $14 billion, but also has managed to keep paying its dividend. Now, Nokia has cut its payout in each of the last four quarters, but still pays a robust 6% yield. Billionaire D.E. Shaw fell out of love with Nokia last quarter, and sold off over 75% of his stake (check out D.E. Shaw’s latest moves).

From a valuation standpoint, Research In Motion and Nokia’s poor outlooks put earnings expectations in the red for the foreseeable future, at least until we can see the full effects of the latter’s Blackberry 10 model. On a P/S basis, Nokia remains cheaper (0.35x) than Research In Motion (0.46x), and well below communications company Harris (1.0x).

Any “buy” recommendation for Research In Motion remains uncertain at best, as user-friendly Android and iOS devices continue their onslaught of smartphone market share. This uncertainty puts Research In Motion’s three-year expected earnings growth rate at -12%, where the other communications peers listed here – Harris, Google and Qualcomm – all have 30%+ growth rates.

Even while taking a longer term focus, we remain unconvinced regarding Research In Motion’s ability to execute a turnaround. We look at Nokia’s long-term results following its slide from being a mobile titan, and worry Research In Motion may be caught in a similar trading range indefinitely. Interestingly, Research In Motion may also be a takeover target in the sights of several notable hedge funds (see all five here), so there is some hope on the horizon.