Research In Motion Ltd. (NASDAQ:RIMM): Don’t Bet On A Stock Comeback
Jeff Uscher: Research in Motion Ltd. (NASDAQ:RIMM), maker of the BlackBerry phone, traded sharply higher yesterday (Thursday) after Goldman Sachs analyst Simona Jankowski upgraded RIMM to a “Buy” with a price target of $16. RIM gained 4% Thursday to close at $11.54.
Although there are a growing number of bulls among analysts on the Street, there is still a large and vocal group of bears who think that RIM is done for.
Research in Motion is planning to launch its BlackBerry 10 smartphone on Jan. 30, 2013. The company is pinning its hopes of survival on the BlackBerry 10 taking a small piece of the smartphone market away from giants Apple Inc. (NASDAQ:AAPL) and Google Inc. (NASDAQ:GOOG), which split the smartphone market between their iOS and Android operating systems, respectively.
Goldman Sachs’ Jankowski says that the BlackBerry 10 (BB10 in the terse to the point of being unintelligible analyst-speak) doesn’t even have to be a success for RIMM shares to perform well.
“We now assess a 30 percent chance of success for BB10 given positive early reviews, broad-based carrier support, attractive features, and interest by carriers and consumers in broadening the field beyond Android/iOS,” Jankowski wrote.
Other analysts are even more bullish.
Rallying Behind RIM (Nasdaq: RIMM)
Peter Misek of Jeffries & Co. also sees a 30% chance that the BlackBerry 10 will succeed. If RIMM does succeed in grabbing a share of the smartphone market for the BlackBerry 10, Misek sees the shares trading up to $43 during 2013.
Both Jankowski and Misek cite a positive reception from telecommunications carriers who want to break up the duopoly that now exists between Apple’s iOS and Google’s Android.
“We have been surprised by the strongly positive initial feedback on BB10 from carriers,” Misek said in a research report cited by Techvibes, a Canadian technology blog. “We expected a more muted response, given BB10 is two years late and RIM’s market share has plunged from 20% to 5%…Our theory,” he concluded, “is that carriers see BB10 as one of their last chances to avoid being locked into a long-term smartphone OS duopoly.”
Another reason for optimism is technical. According to Techvibes, RIM has developed the BB10 browser to be superior in standardized performance testing, making nearly perfect scores in HTML5 tests and hitting Ring 1 in Ringmark tests, which were developed by Facebook (NASDAQ:FB) to create performance standards for mobile browsers. This means that developers can build a lot of functionality into BB10 apps and not worry about diminishing the performance of the browser.
This means the app developers can build great apps for the BB10 but, just because they can do it, doesn’t mean that they are going to think it is a good idea.
Who can blame them? Recent comments such as Yahoo! Inc. (NASDAQ:YHOO) CEO Marissa Mayer who told Fortune magazine in an interview, “…we are literally moving the company from BlackBerrys to smartphones.”
Which means that Yahoo is trading in its BlackBerrys for iPhones and Android phones.
Earlier this month, the U.S. National Transportation Safety Board decided to switch from BlackBerrys to iPhones saying that their BlackBerrys fail “both at inopportune times and at an unacceptable rate.”
In October, the Pentagon’s Defense Information Systems Agency posted a notice soliciting “…bids for software that can monitor, manage and enforce security requirements for devices made by Apple and Google Inc, with an eye to awarding a contract in April,” according to Reuters. The Pentagon said that it will still use a large number of BlackBerry devices but wants to open the door to other suppliers.
Reuters continued, “The Defense Information Systems Agency (DISA) quietly posted its request for proposals on a federal website on October 22, the same day that the U.S. Immigration and Customs Enforcement Agency said it would end its contract with RIM in favor of Apple’s iPhone.”
With all of these large-scale customer defections, BlackBerry’s share of the U.S. smartphone market fell to 1.6% as of October 28, according to research by Kantar Worldpanel ComTech. The study said that RIMM lost more customers to Apple due to the launch of the iPhone 5.
The initial enthusiasm for the shares following the Goldman upgrade was tempered by news that Nokia Corp. (NYSE:NOK) will seek to prevent RIM from selling BlackBerrys in the U.S. Canada and the UK over a patent dispute following a ruling in Nokia’s favor by a Swedish court.
That’s not good for business.
Playing RIM (Nasdaq: RIMM)
So, what to do with RIMM stock?
The shares closed Thursday at $11.54, up almost 4%, near the low of the day after being as high as $12.30 right after the open.
As much as I like being a contrarian, a 30% chance of success after a 76% rally from the Sept. 24 low doesn’t really put the odds in my favor.
By the same token, it won’t take much to go right for the current rally to continue.
It’s probably best to just walk away and let the analysts fight it out amongst themselves.
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