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RIM Investors Cheer To 'Less Bad'

NEW YORK ( TheStreet) -- Beleaguered BlackBerry maker Research in Motion (RIMM) has become a mystery to me. Considering the stock once traded at $140 and now sits under $10 per share, I don't think I'm alone.

Regardless of what the company does from this point forward, it is certain to be dissected and become a case study in business schools for many years to come. But at the moment, on the heels of its recent earnings report, the company is making a case that the rumors of its death just might have been exaggerated.

The Quarter That Was

For the fiscal second quarter, RIM reported a loss of 45 cents a share on revenue of $2.87 billion. This compared to profits of 80 cents a share in the same period of a year ago. Though its revenue numbers represented a drop of over 30%, it was much better than the 40% decline projected by analysts. In other words, RIM actually logged a beat by over $370 million or 15%. Even more impressive is that it also beat EPS estimate as analysts were expecting a loss of 46 cents.

What's more, the company actually recorded a loss of (only) 27 cents a share when excluding restructuring charges of its CORE program. In essence RIM actually beat its numbers by $0.19 cents. Over the past five quarters, this represents the second time RIM has exceeded street expectations. Helping with its performance was that the company said in addition to shipping 130 thousand PlayBook tablets, it was also able to ship an estimated 7.4 million BlackBerry smartphones.

In terms of outlook, RIM did not offer much on the numbers side other than to say that it expects continued pressure on its operating results for the remainder of the fiscal year due to increased competition -- presumably from the likes of not only Apple (AAPL), Google (GOOG) and Amazon (AMZN), but also from Microsoft (MSFT) whose Windows Mobile phone and Surface tablet are due out later this year. As a result, RIM expects lower handset volumes and increased marketing expense.

To combat competitive attacks and a possible loss of subscribers, RIM said that before the launch of the BlackBerry 10 smartphones due in the first quarter of next year, it plans to continue to invest in targeted marketing and sales programs to aggressively drive sales of BlackBerry 7 handheld devices. For that matter, it also expects to report a loss in its next quarter (Q3) due to charges related to its transition to not only BlackBerry 10, but also its CORE program.

Moving Forward

As much as the company has been beaten up this year, it deserves a considerable amount of credit for this report. Investors seem to agree as everyone has been searching for something with RIM to cheer about. After the stock reached a new 52-week low last week of $6.22, the announcement sent shares soaring to $7.14 at the close and reaching as high as $8.70 during the afterhours trading session -- representing an increase of over 20%.

I appreciate the glass-half-full outlook. But in this case, it's an overreaction.
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