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RIM’s market share heading below 5%

Jonathan Ratner, National Post
Monday, Apr. 30, 2012

Research In Motion Ltd.’s global market share may soon be in danger of dipping below 5%, according to RBC Capital Markets analyst Mark Sue, who lowered his estimates on the smartphone maker.

With supply chain data showing a backup in RIM products, he now forecasts the company will sell 9 million BlackBerrys in the quarter ending in May. That compares to the consensus estimate of 10.5 million units.

“Limited scale at that point can lead to shrinking operating margins and in our worst case scenario RIM may burn cash next year,” Mr. Sue told clients. “The good news is that RIM has no debt.”

Given the limited visibility to RIM’s near-term fundamentals, the analyst moved his sector perform rating to speculative risk from above average risk, while maintaining a US$13 price target on the stock.

“In our opinion, shares aren’t trading on fundamentals, but instead on the potential for value creating strategies: licensing, partnerships, joint ventures, and other strategic alternatives,” Mr. Sue said.

“In the ever competitive smartphone market, Nokia, RIM, Motorola, Sony, LG, and a slew of others are donating market share while Samsung and Apple continue to gain market share,” he added. “We believe even RIM’s core enterprise market is at risk to rising bring-your-own-device pressures and switching to iPhone and Android. RIM is resorting to price cuts to boost sell-through, but that may not be enough to stem the tide.”

With RIM expected to show off prototype BlackBerry 10 devices at its developer conference in Orlando this week, its high-end LTE device may garner interest from core BlackBerry fans in North America. However, Mr. Sue believes RIM is late to the market as everyone wants apps and RIM has few compared to the competition.

The analyst expects the company’s average selling price will decline by 20% in fiscal 2012, service average revenue per user will dip 11%, and unit sales will fall 19%.

-Financial Post.

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