Wall Street's Hate-Hate Affair With Research In Motion (RIMM) Continues, Susquehanna Downgrades to 'Negative'

Susquehanna Financial Group downgraded Research In Motion Ltd. (NASDAQ: RIMM) to Negative due to a "deterioration" of positioning in the consumer and commercial markets, along with underwhelming sales of its new Torch handset.

The firm does see a strong second quarter from the maker of BlackBerry smartphone, however the analysts point out several key components that led to an overall bearish point of view.

• Weak sales of the new BlackBerry Torch.
  
• Smartphone market share loss, especially at the high-end.
  
• Growing risks from competitors, especially Apple Inc.’s (NASDAQ: AAPL) iPhone and Google Inc.’s (NASDAQ: GOOG) Android devices.
  
• Increasing popularity of native third party applications favoring Apple’s iOS and Andriod.

Susquehanna has a 12-month price target on RIM set at $37.50, but added that the company may see short-lived relief rally around its earnings.

"The Blackberry 6 OS is a much anticipated and necessary upgrade for RIM devices; however, it only incorporated features and functionality that we believe places it just shy of iOS 4 and Android 2.2," Susquehanna analyst Jeffrey Fidacaro. "Moreover, our checks with AT&T stores show Blackberry Torch demand that is somewhat disappointing. While we expect Blackberry 6 to create an upgrade cycle for existing Blackberry users over the next few quarters, our findings show that the new OS platform is not compelling enough to significantly sway users from the iPhone or Android-based devices."

BlackBerry devices are losing market share in the high-end to Apple and Google’s Android, while also there are concerns arising over RIM’s dominance in the commercial market. Reports surfaced last week that JPMorgan Chase & Co. (NYSE: JPM) and UBS AG (NYSE: UBS) are each testing alternatives to RIM’s devices for its employees.

RIM has long been seen as the gold standard for corporate mobile communication, but the company has competition from rivals that are looking to expand into this sector.

"The significance here is that alternative platforms supporting competitive operating systems are penetrating what was once considered RIM’s stronghold within enterprise. Particularly surprising is the traction in financial institutions as mentioned above, given that they are highly regulated, are required to archive all employee message communications, and demand a high degree of security."

Despite the downgrade, shares of RIM are up 26 cents to $44.38 in midday market movement on Monday.

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