Loss of faith in RIM deepens as PlayBook debut nears

Fri Mar 25, 2011 4:43pm EDT
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By Alastair Sharp

TORONTO (Reuters) - Research In Motion is facing skeptical investors unsure the BlackBerry maker can pull off a difficult transition as it promises strong growth from a tablet and operating system few have seen.

Shares of the Canadian company plunged more than 10 percent on Friday, after it warned of weak profit and revenues in the short term as it ramps up for next month's launch of the long-anticipated PlayBook tablet.

To cushion the blow, RIM took the unusual step of providing Wall Street with a forecast for full-year earnings that topped the expectations of all but the most optimistic pundit. The number supported RIM's contention that the pain surrounding the PlayBook launch would set the stage for long-term gain.

By and large, investors and analysts were not buying that argument. Even Deutsche Bank analyst Brian Modoff - the lone analyst with a forecast that was above RIM's full-year figure - cut almost a full dollar off his earlier estimate on Friday. He also suggested clients sell their RIM shares.

Short-sellers - who profit on bets a stock will decline - may cash their chips but are unlikely to lose interest in RIM.

"It's probably going to underperform for quite some time until they can get some traction back," said Brad Lamensdorf, who co-manages AdvisorShare's Active Bear fund and had a roughly $500,000 short position in RIM ahead of the earnings.

"They're giving you the bad news right now - they're airing their dirty laundry," he said.

RIM has spent heavily developing and marketing the PlayBook, designed to snatch some glory away from Apple's iPad, which virtually invented the now-crowded tablet market.   Continued...

<p>A new Blackberry tablet, the PlayBook tablet computer, is displayed at the GSMA Mobile World Congress in Barcelona February 16, 2011. REUTERS/Gustau Nacarino</p>