Research In Motion downgraded to underperform
The one-two punch of Apple's iPhone and Google's Android platform have doomed the BlackBerry maker.
By: Zacks Equity Research
We are downgrading our recommendation on Research In Motion (RIMM) to "underperform" from "neutral" on the back of continued somber financial results coupled with a reduced outlook.
Research In Motion has consistently struggled ever since Apple's (AAPL) iPhone hit the market. The situation worsened when Google (GOOG) launched its Android software, which was adopted by several handset manufacturers. Both phone platforms have crept into the corporate environment, making RIM's BlackBerry operating system obsolete as it continues to lose market share.
RIM's global smartphone market share fell to 12% in the last quarter from 19% a year earlier. The situation is worst in the U.S., where revenue declined 7% year over year.
Research In Motion is planning to launch its new QNX-based smartphones in the second half of the year. However, we believe that the long-delayed product launch will further create pressure not only on their present market share but also on the average selling price (ASP).
In the mature North American market, Research In Motion has failed to compete with large and established competitors, while in the lucrative emerging markets, the company is facing cutthroat competition from low-cost phone manufacturers in Taiwan, China and India. Moreover, availability of cheap Android-based smartphones and the iPhone in these emerging markets is a big threat at both the enterprise and retail consumer segments.
Recently, the company launched a new BlackBerry PlayBook operating system for tablet computers to improve the way email functions. However, we believe that the upgrade will not make a huge difference to its market share, as the tablet market is dominated by Apple's iPad. The newest version of the iPad recently hit stores, and Apple sold a record 6 million in one day.
The PlayBook can't squeeze into the lower end of the market, either, as Amazon's (AMZN) low-priced Kindle tablets are already dominant there. That leaves less opportunity for higher-priced PlayBook tablets to be a success.
Currently, Research In Motion has a short-term Zacks No. 5 rank ("sell" rating).
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