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As RIM (RIMM) Strategic Review Comes to a End Only One Option Exits, And It's Not a Good One - Analyst

August 7, 2012 12:05 PM EDT Send to a Friend
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Research In Motion's (NASDAQ: RIMM) strategic review will likely be coming to an end soon and the result might not be anything that can drive the stock higher.

Jefferies' analyst Peter Misek believes that strategic review will end when RIM reports results on 9/27 and it now appears the company is realizing what Wall Street has been saying for some time: "they are a subscale manufacturer
and desperately need a partner." The end result of the review, will likely be for RIM to revive discussions with Samsung regarding a BB10 licensing deal.

One big problem exits though... Samsung is undecided.

"While currently doing very well in handsets, we believe Samsung is concerned about GOOG and MSFT eventually vertically integrating. Among other options, we believe Samsung is considering ramping up its internal OS development efforts, licensing BB10, or buying RIM. We think any acquisition is unlikely until after BB10 launches. We believe terms for a licensing deal are much worse for RIM now than during the initial round of talks in Jan. Our sensitivity analysis assumes 20% cannibalization and 25% of RIM's typical Services ARPU. At the high-end, $10/handset fee and Samsung selling 20M BB10 handsets (~10% penetration) would add $0.36 to RIM's CY13 EPS ($0.10 of which would come from selling fewer loss-making RIM handsets). Helpful, but not a game changer; however, it might allow RIM enough time to shift to more of a S/W model."

Meanwhile, RIM fundamentals continue to deteriorate. Several OEMs are specifically targeting Blackberry subscribers due to the delay in BB10, Misek notes.

Misek maintained an Underperform rating and price target of $5.00

For an analyst ratings summary and ratings history on Research In Motion Ltd. click here. For more ratings news on Research In Motion Ltd. click here.

Shares of Research In Motion Ltd. are down 0.4 percent today to $7.23.




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Comments

Die Hard Fans Abound
Black Tongue on 2012-08-07 21:24:53
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I own a fine dining restaurant that caters to an upscale business clientele. I see a lot of Blackberries in the dining room. I often ask the Blackberry owners if they plan to give up on RIM. At this point, the majority do not, citing the handset's simplicity, durability, battery life, PC interface, reliable email, and the hard keyboard. They are fascinated by my Playbook when I show it to them. If RIM can get the new BB10 handsets to the market, and with bug free software, I think they have a pretty good chance of retaining the enterprise and business market.


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