RIMM: Bernstein Cuts Ests, Target, On iPhone/Android Threat
By Eric Savitz
Research In Motion (RIMM) shares are coming under pressure this morning from a bearish note by Bernstein Research analyst Pierre Ferragu. The analyst, who already had an Underperform rating on the shares, cut his price target on the stock to $40, from $55. He also chopped his EPS outlook for the February 2011 fiscal year to $5.09, from $5.24; more disturbingly, he reduced his FY 2012 forecast to $4.11, from $4.84. The Street consensus is for $5.55 this year, and $5.96 next week.
Ferragu says the findings of a survey of 200 U.K. and U.S. companies found “a scary outlook” for RIMM in the corporate market, long the company’s most significant strength.
* For one thing, he notes that the corporate mobile e-mail market is “highly penetrated” outside of the small- and medium-sized enterprise market. “Growth in the number of companies using mobile e-mail will be limited to the SME market, in which RIMM is likely to suffer the most from competition,” he writes. “If there is still some growth in the number of users at companies already using mobile email, it is limited and we suspect it will turn into negligible value growth as it will go along with significant ASP decline.”
* More importantly, he says, the firm’s research says that RIMM’s position is “under a sizeable threat.” The report contends that 74% of companies with mobile e-mail have adopted alternative platforms, including the Apple (AAPL) iPhone and Android-based devices. Ferragu adds that this phenomenon is “very new,” with almost all of the company’s surveying adopting that policy in the last two years, and half in just the last 12 months. “We expect these companies to progressively ramp up the installed based of non-Blackberry solutions and therefore expect increased pressure on RIM’s performance.”
Ferrague contends that there is little RIMM can do to respond to this threat. “Enterprise satisfaction with RIMM solutions is very high, and most managers surveyed said that they expected BlackBerry products to remain innovative and competitively featured,” he writes. “The issue boils down to cost and consumer preferences: employees want to be able to use their own phone, and allowing them to do so presents IT and telecom managers with a way to substantially cut their operating costs.”
Concludes Ferragu: “We don’t believe corporate provides a valuation floor for RIMM anymore. On the contrary, RIMM is under a significant threat and we now expect the contribution to earnings of the corporate segment to shrink going forward.”
RIMM is down $1.52, or 3.3%, to $44.07.
2010 Dow Jones & Company |
