In late June we reported that Credit Suisse downgraded their rating of Research In Motion (RIMM), the company behind the BlackBerry product line, from Outperform to Neutral, and lowered the company’s stock target from $70 to $30.
In their research report published June 21st, they stated, “We believe innovation is coming too slowly at RIM, resulting in continued share loss along with further margin risks from vulnerability in its high margin services stream.”
With the company’s innovation slowing down, they’re also falling behind on product deliveries. The San Francisco Chronicle reports: “A handful of models that RIM introduced this month were its first new phones in a year, a gap that caused the BlackBerry to lose ground. Its share of the global smart-phone market fell to 12 per cent in the second quarter from 19 per cent a year earlier, according to Gartner Inc. Over the same period, iPhone maker Apple Inc. climbed to 18 per cent from 14 per cent, and Android rose to 43 per cent of the market.”
RIMM, however, has been busy: rumour has it the Canadian-based company is building smart phones that will use QNX software capable of running Android apps. The phones are rumoured for release in the first half of next year.
Research in Motion is looking much like Apple did all those years ago – down on their luck and on the path to ruin – which is why RIMM may be poised for a spectacular comeback. After all, RIMM has been subject to so much pessimism that all of the bad news may have already been priced in. In fact, at this point a bit of good news can go a longer way in boosting share price than more bad can harm it.
It’s also worth mentioning that Steve Job’s retirement from Apple CEO leaves its competitors, which include RIMM and Google, anxious for any corporate slip-ups that could provide opportunities to regain shares in the smart-phone market.
Releasing models capable of running android apps may be a gateway for re-entering the cutting-edge smart phone scene. Surely Research in Motion hopes this move will boost its slowing sales and revive its image from a company whose heyday has already come and gone.
Furthermore, while corporate demand for blackberries still exists, the company is in little danger of disappearing. This is because their compatibility with Microsoft’s Outlook has given them a great competitive advantage in the professional field. However if the company is looking for growth opportunities, which it certainly is, the Android bandwagon seems a very logical next step.
Certainly the addition of Android’s 250,000 apps would be a boost to RIMM’s comparably small, not to mention undesirable, collection.
The stock currently rests at $28.35/share. Interested in trading on the idea of RIMM’s comeback? Take a look at Kapitall’s tools below and use them as a starting-off point in your own analysis.
Using Kapitall’s Turbo Chart you can see that the company dipped below the S&P500 in late March and has been steadily losing ground since.
Press “play” on the Compar-O-Matic to view the changes in Research in Motion’s analyst recommendations relative to its smartphone competitors Apple and Google. RIMM currently has a negative “hold” rating.