RIM Failing on All Cylinders

NEW YORK ( TheStreet) -- Research In Motion ( RIMM) failed a confidence test by badly missing nearly every target in its fiscal second-quarter results, sending investors rushing out the exits.

The BlackBerry maker had a 10% shortfall on earnings, it came up $300 million light on sales, it sold about 1.5 million fewer phones and shipped only a third of the PlayBook tablets that Wall Street expected.

RIM Co-CEO Jim Balsille

For investors, the dismal results scratch RIM from the category of would-be contender in smartphones to a dicey long shot. RIM shares fell an eye-popping 20% in the wake of the disappointing report. And even the usual optimism from co-CEOs Mike Lazaridis and Jim Balsillie on RIM's earnings call Thursday evening only contributed to the stock's slide.

RIM's "credibility sinks further as it's apparent to us that visibility remains very low and investor risks remain elevated," RBC's Mike Abramsky wrote in a research note Thursday.

Credibility isn't the only thing running low at RIM. Not only is it falling further behind Apple ( AAPL) and Google's ( GOOG) Android in the smartphone race, the company shocked Wall Street by draining half of its cash last quarter.

After paying $1.5 billion on patents as part of the RockStar Consortium with Apple and Microsoft ( MSFT), and taking charges for restructuring and staff buyouts, RIM was left with $1.4 billion on the books.

The move puts an already teetering RIM on an even steeper precipice.

Usually, when a company hits hard times, and has rolled the dice on a new generation of devices a year from now to revive the business, keeping a big cash cushion on hand lends comfort. Unfortunately for RIM, with huge inventories of PlayBooks piled in warehouses, second-quarter cash flow turned negative, adding to the drama.

The problem with eroding credibility is that investors don't seem willing to hang around and see if the QNX devices will deliver RIM's turnaround. The new operating system, coming next year, promises all the fun of Android compatibility and all the business security of BlackBerry.

But an untimely glitch or delay on that front could be even more crushing for RIM and its investors.

--Written by Scott Moritz in New York.

To contact this writer, click here: Scott Moritz, or email: scott.moritz@thestreet.com.

Follow Scott on Twitter at MoritzDispatch

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