We are upgrading our recommendation on Research In Motion Ltd. (RIMM) to Neutral, solely based on its extremely low current valuation, which plunged nearly 74% last year. For the first time since December 2003, the stock price of the company tumbled below $10 per share. We believe at this stage, further downslide of the stock price is a remote possibility.
Meanwhile, Research In Motion remains in dire strait as management has forecasted an operating loss in the first quarter of fiscal 2013. Further, the company hired investment banks, JPMorgan Chase & Co. and RBC Capital Markets, to evaluate various strategic options including the sale of the company as management is unsure about its future prospects. So far, Research In Motion has failed to provide any time frame when its free fall will ultimately end and is delaying the launch of its much hyped QNX based phones.
Research In Motion is facing severe problems from several fronts. The company is facing an ever increasing competitive landscape, a stagnant product portfolio, and an unfavorable product mix. The nightmare of Research In Motion continues ever since Apple Inc.’s (AAPL) iPhone hit the market. The situation aggravated once Google Inc. (GOOG) launched its Android software and several handset manufacturers adopted that operating system.
We believe management has so far failed to do a proper research which can place the company’s motion forward. We are still waiting for a game changing product (either software innovation or hardware innovation) which can turn the tide in favor of Research In Motion.Moreover, delaying the launch of its new BlackBerry 10 smartphones may further deteriorate its market share in the forthcoming quarters. Management stated that BlackBerry 10 OS based devices will be introduced in the market in late 2012.
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