Before diving into the fundamentals, a technical prospective is needed. Last quarter’s earnings gap sits from $8.87 to $7.98. 61.8% of this gap has filled during the August 6th -10th pop on rumors and speculation of IBM and RIMM getting together. This is naturally following the RIMM/Samsung and RIMM/MSFT past rumors; and considering RIMM’s 17% short interest, why not float a rumor out there for a good pop. Besides the unfinished gap fill, the rumor-powered prior high sits also near $8.47; so unhappy rumor buyers who are still stuck with stock may offer out supply at these lofty levels (lofty naturally being a relative term, especially for RIMM, as it has been sitting near lows).

Do the fundamentals back up today’s gap? In short, it depends on what RIMM story you subscribe to. RIMM has put forth many products that were intended to be ‘game changers’ but just ended up falling on their face. Wall Street seems to have a bad memory for prior flops include the extraordinarily hyped up Playbook Tablet. According to former CEO Lazaridis, “the BlackBerry PlayBook solidly hits the mark with industry leading power, true multitasking, uncompromised web browsing and high performance multimedia”…too bad it did not hit the mark in the sales category; with unit sales dropping to 130K this quarter. To put this figure into prospective AAPL moved 17 million iPad units in their most recent third quarter. Now CEO Thorsten Heins said confidently to investors that he believes BlackBerry 10 will take market share. If the new BB10 is anything like history is will not be good for investors. It can be argued that even if RIMM comes out with a superior phone it will not gain traction for the AAPL & GOOG movement is too powerful to stop, and they do not have the apps or ecosystem to back it up.

The chart below shows the annual percentage change in revenue, SG&A (Selling, General and Administrative Expenses), research and development, operating income, and finally cash and short term investments. This chart exemplifies RIMM’s problems. RIMM is burning through cash and not using it wisely, for the devices seem to always lack traction.

While all this is well and good, the trade could be something completely different. RIMM is a perpetual M&A rumor, but it is also difficult to stay short a name trading at $8.00 or a $4.2 billion market capitalization with nearly $1.7 billion in cash and short term investments, unless you have a lot of conviction. So maybe the best trade is no trade at all.

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mark@keeneonthemarket.com