. . . and is praised for realism
Pragmatic view applauded even as RIM watchers predict bleak period ahead
Analysts slashed their price targets on Research In Motion Ltd. Friday, forecasting a bleak future for the Blackberry maker even as its stock enjoyed a bump on renewed takeover speculation.
On Thursday, RIM posted its first quarterly loss in seven years, reported sales that missed the low end of its own estimates, withdrew financial guidance and said it would undertake a comprehensive review of its costs and of strategic options to revive the struggling business, based in Waterloo, Ont.
New CEO Thorstein Heins told analysts in a conference call that RIM could not rule out the possibility of an outright sale of the company although analysts said a deal is unlikely in the near term.
Finance Minister Jim Flaherty suggested to reporters that Ottawa would not attempt to block any sale of RIM to a foreign buyer.
“They will be the masters of their own destiny,” Flaherty said. “We would like RIM obviously to be successful as a Canadian company, which it has been . . . We hope that would persist.”
Despite the gloom surrounding RIM’S fourth-quarter results, Heins drew praise from analysts for his pragmatic view of RIM’S ability to compete with rivals including Apple Inc. in the top-tier consumer market in North America.
“He is more realistic . . . compared to his predecessors,” said MKM Partners’ Michael Genovese.
Heins “sounds open to licensing BB10 to other hardware manufacturers, which could be RIM’S path to participating in the high-end consumer segment,” he added.
Evercore Partners in a report said Heins’s recognition that RIM’S value may lie in its software, services and intellectual property “is a good first step toward survival.”
And Heins’s apparent willingness to consider partnerships or even an outright sale after RIM shares lost 80 per cent of their value over the past year lifted the stock in heavy Nasdaq trading by 96 cents (U.S.) to $14.69 at midday.
Still, the prevailing analyst view is that the company faces huge challenges in stemming sales declines that appear to be accelerating — RIM’S earnings report showed a 21 per cent drop in Blackberry sales in the fourth quarter compared with the previous three months.
Tech research website CNET this week reported that RIM devices accounted for only 5 per cent of smartphones sold in the U.S. in the past three months, from more than 40 per cent in 2010.
Analysts said RIM is not a likely takeover target, at least until potential buyers can gauge the success of its new BB10 operating system. Its release has been delayed until the second half of the year. And they said radical measures such as spinning off RIM’S hardware division would result in a much smaller company, and are unlikely to be pursued in the near term.
“Overall, the challenges appear immense,” said Scott Thompson of FBR Capital Markets. “We expect the company’s longer-term viability to hinge on the success of BB10 OS and, potentially, a single smartphone product currently under development and expected to be on the market in 2012.” Credit Suisse in a report said RIM faces at least another year of declines despite a “blossoming smartphone market” around the world. It also said RIM sales could fall by another 25 per cent over the next year after its BB7 phones failed to generate excitement in the U.S.,
“We believe that Blackberry cannot succeed if we tried to be everybody’s darling . . . Therefore, we plan to build on our strength.” THORSTEIN HEINS RIM CHIEF EXECUTIVE OFFICER
while the company’s growth globally is under threat from lowerpriced handsets running the opensource Google Inc. Android software. Credit Suisse joined analysts at Canaccord Genuity, Barclays Capital, Nomura, BMO and RBC in lowering their price targets on the U.s.-listed shares of RIM. The company on Thursday reported a fiscal fourth-quarter loss of $125 million partly on writedowns of unsold Blackberry smartphones. It posted sales of $4.2 billion and said Blackberry shipments fell to 11.1 million units, at the low end of analyst expectations. Playbook tablet shipments exceeded forecasts at 500,000 units and RIM’S cash position improved to over $2 billion. Heins, who replaced co-chief executives Mike Lazaridis and Jim Balsillie in January, announced the initial stages of a strategic review and efficiency push and did not rule out a divestiture of RIM’S hardware division or even the sale of the entire company. He also said RIM would refocus on its core business users rather than on individual consumers, though a spokeswoman said RIM has no plans to abandon the consumer market. “We believe that Blackberry cannot succeed if we tried to be everybody’s darling and all things to all people,” Heins said. “Therefore, we plan to build on our strength.” The company also announced that Balsillie, who with Lazaridis helped establish RIM as a smartphone leader, resigned from his director’s role. RIM said chief technology officer for software David Yach and chief operating officer of global operations Jim Rowan will also leave the company.