Let’s Face It, RIM Is a Total Disaster

Having consistently failed to meet its financial forecasts over the past year, Research In Motion has stopped providing them. Which is just as well, because Wall Street has clearly lost all faith in the company.

To wit, Morgan Stanley’s brutal downgrade today of the BlackBerry maker in advance of its quarterly results Thursday. Analyst Ehud Gelblum this morning slashed his rating on RIM to “underweight” from “equalweight,” cut his forecast for fiscal 2014 earnings per share to a loss of $1.39 from a loss of 85 cents, and dropped his revenue projection for the same period to $7 billion from $9.7 billion.

That’s well short of the $12 billion Wall Street currently expects. But according to Gelblum, there’s no way RIM will ever make that number, because the company is a financial train wreck, and its decline is fast reaching the point where even its new BlackBerry 10 operating system won’t be enough to turn it around.

“RIM is likely to significantly miss estimates in its FQ2’13 August quarter as it gets hit with the triple whammy of a quickly aging legacy portfolio of BB7 devices, the standard pause in unit shipments ahead of the launch of its new BB10 phone and the overall swoon in the smartphone market caused by the pause ahead of the anticipated October iPhone 5 launch,” Gelblum said in a note to clients today.

Add to that RIM’s rapidly deteriorating fundamentals and the very real risk that its new line of BlackBerry 10 handsets misses the back-to-school season, or flops, undermined by their lack of a keyboard — a key selling point of current BlackBerrys — and, well, the company’s future begins to look pretty bleak.

Said Gelblum, “The only way RIM remains a viable entity is at a fraction of its current size, a transformation that erases much of its earnings power.”

What sort of transformation? One that reduces the company’s workforce by 90 percent, trimming it from 16,500 employees to 2,000.

A brutal commentary on RIM’s current state, and one that has dragged the company’s share price down more than 7 percent today. As I write this, RIM shares are trading at $9.16.

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