Dumb Money Buys Into BlackBerry Head Fake

NEW YORK ( TheStreet) -- When it comes to irrational exuberance, I can't think of a better recent example than the 34% year-to-date gains seen in shares of BlackBerry ( BBRY). The disconnect that exists between the company's investors and the real world is never-ending.

This is a company that still doesn't know where it's going. It wasn't long ago that BlackBerry shares nearly tripled on the prospects of its new operating system called BB10. Ahead of the launch, some analysts proclaimed that BlackBerry could one day trade in the $40's. BlackBerry stock traded under $10 at the time.

The argument for BlackBerry was that it could license its operating system to hardware rivals like Apple (AAPL) and Microsoft (MSFT). It was (then) seen as a "significant growth opportunity" for the company. In the months leading to the launch, the stock peaked at around $22. But BB10 was dead on arrival. Nobody cared. Yet investors still insist that BB10 is better than iPhones and Android-powered devices.

In fact, in the recent quarter, BlackBerry sold a paltry 1.9 million devices. In Apple's fiscal first quarter, it sold 51 million iPhones. This was despite what Apple's management called "supply constraints." Never mind the fact that this was 3 million more units than Apple sold the previous year (a 7% increase); it was considered a colossal failure. There's a different standard.

In BlackBerry's case, the company's 1.9 million devices sold amounted to roughly half of the previous year's sales. The stock, by that time, had lost half of its value from the low $20's. This, among other reasons, forced out CEO Thorsten Heins last fall. This came right after Heins announced that the board had formed a special committee to "explore strategic alternatives." Investors cheered that news. But weeks later, the stock was in the low single digits.

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