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RIM is getting obliterated this morning even though it beat analyst expectations last night.While there are many legitimate reasons to sell RIM’s stock — like say, it’s toast and has no chance of beating Apple, Google, or Microsoft with BlackBerry 10 — the reason that it’s currently getting sold doesn’t seem all that legit.
After beating earnings last night, RIM’s stock was up 6%. But on the earnings call CEO Thorsten Heins warned that RIM could lose some service fees revenue with the introduction of BlackBerry 10. This sent the stock into a tailspin. This morning it was off as much as 17.9%.
RIM collects service fees for advanced security and mobile management features on its current phones. With BlackBerry 10, it might not be collecting as much service revenue. The service fees are highly profitable revenue for RIM.
If the service fees go away, it’s a big hit to RIM.
However, investors may be over reacting to this news, says Bernstein analyst Pierre Ferragu. He thinks there’s two ways the BlackBerry 10 launch plays out.
- If it’s a failure and no one buys BlackBerry 10 phones, then who cares? RIM will still collect service fees. It’s been doing better than expected collecting service fees as the core business shrinks.
- If BlackBerry 10 is a success and it collects less in service fees, then who cares? RIM will have pulled off a miracle and made a successful new operating system. That will send the stock soaring.
Ferragu is optimistic on RIM in the short term. He thinks it can grow in the next three months, but will collapse after that.