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Research In Motion (RIMM), a leading mobile device manufacturer best known for its BlackBerry smartphones, announced fiscal first-quarter (ended May 28, 2011) earnings of $1.33 a share, well below our $1.50 estimate and the $1.38 year-earlier result, on a somewhat disappointing 16% year-over-year top-line advance. Management had previously warned that BlackBerry shipments were likely to wane during the May quarter, with the product mix probably shifting toward handsets with lower average selling prices, due to an aging product portfolio and delays in introducing new models. Notably, the company is losing customers who spurn its aging models for Apple’s (AAPL) iPhones and handsets running Google’s (GOOG) Android software, given that it has not rolled out a new BlackBerry in almost a year. Despite the warning, things were a bit worse than we expected. Moreover, the slowdown has continued into the August interim, and delays in new product introductions have led to reduced expectations for the second quarter. Consequently, the stock sold off sharply on the news.

Clearly, the company faces numerous challenges and is losing market share. As a result, it has announced that it will kick off an initiative to streamline operations across the organization, resulting in headcount reductions. The realignment will focus on eliminating redundancies and reallocating resources so that it can focus on the areas that offer the most appealing growth opportunities, as well as accelerate new product introductions. The layoff program appears to already be under way, and the company is likely to reap some rewards during the subsequent period. Nonetheless, we have pared our earnings expectations for both fiscal 2011 and 2012 (years end in February).

Although Research In Motion is looking to cut costs and reduce headcount, it has had a number of executives depart on their own accords recently. This is unwelcome news for a company that is finding the going now somewhat more difficult. Indeed, given the significant fall in the stock's value, takeover rumors are beginning to swirl on Wall Street. Notably, since hitting an all-time high in June of 2008, RIMM has lost almost $70 billion in market value, leaving it with a current market capitalization of about $13.6 billion. And at the recent quotation, an acquirer could pay a 50% premium and still buy Research In Motion for a lower price-to-earnings multiple than any company in the industry. In doing so, a buyer would get a smartphone manufacturer with a host of patents that has significant corporate market share and a leadership position in secure mobile email. Research In Motion also generates more free cash versus its market value than any of its rivals. To top things off, the Ontario-based company has an attractive balance sheet with no debt and nearly $2.0 billion in cash.

This, of course, begs the question, what companies would be interested in acquiring RIMM? Many names have been thrown around in recent days, though Microsoft (MSFT – Free Microsoft Stock Report) and Apple appear to be garnering the most attention. Both of these names make a certain amount of sense, as they are each very well capitalized with significant cash reserves. Microsoft is, itself, facing increased challenges to gain a better foothold in the mobile device market, while Apple could use RIMM to make headway into the corporate arena, a space dominated by BlackBerries.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.