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Why Analysts Get Grim on RIMM

The company is betting a lot – maybe too much – its BlackBerry 10 operating system


Research in Motion (NASDAQ:RIMM) is set to present its fourth-quarter earnings report on Thursday, and comments on prospects for the company have been predictably negative.

For starters, the report, which will be the first since Thorsten Heins took over as CEO, follows news that the Canadian company has lost homeland market dominance to Apple (NASDAQ:AAPL).

Barclays (NYSE:BCS) analyst Jeff Kvaal titled his RIM comments “Grim and Getting Grimmer.” He based his $12 share-price target and neutral rating on the expectation that RIM’s earnings won’t improve until the latter part of this year, at the earliest, when the BlackBerry 10 operating system is scheduled for rollout. That likely means the company will have to bide its time with outdated BlackBerry 7 products and the languishing PlayBook tablets.

A 10-point research note from Citigroup (NYSE:C) analyst Jim Suva, who also set a $12 target but with a sell rating, took further issue with RIM’s scheduling. The BlackBerry 10 launch, he notes, will miss the lucrative back-to-school sales period near the end of summer. It’s also unlikely that the PlayBook tablets will sell well during that period, given their poor sales performance during the strong pre-holiday season. Suva points out that RIM can’t cut its losses with the PlayBook program because the underlying QNX-based operating system also forms the foundation of BlackBerry 10.

If RIM doesn’t rebound this year, its eulogy may read “death by disinterest.” Cowen Group analyst Matthew Hoffman noted that RIM’s “dominance of enterprise wireless email has ended.”

Strategic errors

PlayBooks initially shipped without a native enterprise email option, forcing interested users to pay for costly upgrades. And BlackBerry is no longer considered the most secure mobile option around; the U.S. government is working on a version of Google’s (NASDAQ:GOOG) Android operating system that’s secure enough for classified information.

RIM is betting heavily that the BlackBerry 10 operating system will prove successful enough to turn its fortunes around. And the company has been pushing to attract developers to the BlackBerry World app market, though a recent survey showed the BlackBerry platform ranking last in developer interest.

The company will try again in May, when it plans to present up to 2,000 free BlackBerry 10 loaded devices to developers attending the BlackBerry Jam event in Orlando, Fla.

Despite the negative press, RIM closed Monday at $14.04 and was up approximately 0.30% early Tuesday. That’s well below the 52-week high of $57.85 and shares will likely dip again following Thursday’s announcement. Zacks is predicting EPS of 0.82 cents, barely within revised guidance of 80 to 95 cents that had been knocked down from $1.15. Zacks does note that RIM has outperformed its estimates for the past three quarters.

Article printed from InvestorPlace Media,

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