Analyst Consensus on RIM: Look Out Below
The market’s reaction to Research in Motion’s latest financials was quick and brutal — a
20 23 percent gutting of the company’s stock that slashed more than $7 dollars from its share price. And reading over the slew of analyst downgrades issued this morning, it’s only going to get worse. Consider these headlines: “RIMM: 2 Strikes in 2 Months” (Gleacher), “Miserable Execution Squanders Even Contrarian Bull Case” (Caris) and “Ctrl + Alt + Delete” (Caris).
RIM’s leadership may vehemently insist the company is “through the worst of its product transition” and poised to recover its lost glory, but no one’s buying it anymore.
“Following a full-blown void of new handsets year-to-date, after having already misread customer demands and competitive landscape, it appears RIMM has now sunk into eroding mismanagement, having delayed even just its evolutionary Bold 9900 refresh multiple times,” Caris & Co. analyst Robert Cihra told his clients. “We don’t see this exactly lending confidence to a timely rollout of RIMM’s more critical NEXT generation dual-core “super-phones,” targeted to start launching early CY12 and migrating to RIMM’s new multitasking QNX OS as its long-overdue rewrite of the core BlackBerry OS.”
Citigroup analyst Jim Suva is even more dubious about the company’s outlook. “Bottom line, we believe RIM has no short-term fixes to improve product portfolio, brand perception, to reinvigorate share gains, revenue growth and profitability,” he said this morning. “Can things get worse for RIM … ? We think so.”
Sterne Agee analyst Shaw Wu offered a similarly bleak outlook, saying he’d mistakenly thought consensus estimates for the company had been cut enough to reflect a worst-case scenario.
“As bizarre as this may sound and we admit we may be early, we believe there is risk that its much lowered FY12 guidance may still prove too optimistic,” Wu said. “That’s because even the latest outlook assumes a strong recovery in BlackBerry unit shipments in the second half of the year.”
There was also this from Deutsche Bank’s Brian Modoff, who was put off by the bizarre earnings call performance co-CEOs Jim Balsillie and Mike Lazaridis turned in yesterday. “While the miss did not necessarily surprise us, we were caught off guard by management’s failure to acknowledge any problem with the company and its current strategic position,” Modoff wrote. “When discussing the headcount reduction, they would not acknowledge that it was a re-organization, much less a restructuring – something we would have viewed as a positive. … They also gave a poor answer to a question about the viability of a co-CEO structure. … The casual style of their answer seemed to be more of a staged piece of theatre than a serious answer to a serious strategic question. We think an about-face change to the company message would be welcomed by investors.”
And then perhaps the biggest blow of all. RIM’s sixth-largest investor, Jarislowsky Fraser Ltd., said it had dumped half its stake in the company and planned to unload more in the future. “We are on the way out,” Chairman Stephen Jarislowsky told Bloomberg. “The stake has been reduced by more than 50% or even more. … They are resting on their laurels.”
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