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RIM: Where's the pain? Add to ...

For all of the missteps by Research In Motion Ltd. , one thing has kept bullish investors standing by the company: RIM has reported record-high earnings and revenues quarter after quarter after quarter, with nary a blip. With earnings going higher and the stock price headed lower, the valuation on the stock has recently been a compelling eight-times trailing earnings. A steal!

However, RIM's profit warning on Thursday has dealt these bullish investors a mighty blow. RIM now believes that its fiscal first-quarter earnings will range between $1.30 (U.S.) and $1.37 a share, down from an earlier forecast for earnings of $1.47 to $1.55 a share.

Even with the trimmed estimates, RIM still looks like a cheap stock based on earnings - but, unfortunately, the new estimates mean that the company is forecasting a very rare decline in quarterly earnings. And that hurts, given that the smartphone market continues to grow and the market for tablet computers is explosive.

In the first quarter of fiscal 2011 (on June 16, the company will report its fiscal 2012 first-quarter earnings), RIM reported earnings of $1.38 a share, meaning that the new forecast is calling for - at best - earnings that are down a penny.

But keep in mind that RIM's earnings aren't seasonal, meaning that it is fair game to compare these first quarter earnings to more recent quarterly reports. In the fourth quarter, RIM reported record-high earnings of $1.78 a share, meaning that the new forecast is 41 cents below that level - or down by at least 23 per cent.

That's ugly. Supporters will no doubt point out that this is a transitional year for Research In Motion as it shifts to a new operating system, launches new BlackBerry products and finds its footing in the market for tablet computers. But other investors clearly see this earnings setback as the start of a trend -- and they aren't sticking around to see it through.

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