RIM's market share slipping even globally - analysts

Sat Sep 17, 2011 9:30pm IST

A person uses the new Blackberry Bold 9900 at a release party to promote the BlackBerry OS 7 devices in Toronto August 3, 2011. REUTERS/Mark Blinch/Files

A person uses the new Blackberry Bold 9900 at a release party to promote the BlackBerry OS 7 devices in Toronto August 3, 2011.

Credit: Reuters/Mark Blinch/Files

Related Topics

REUTERS - Research In Motion is losing market share much faster than expected not just in the United States but globally, amid mounting concerns over its cash flow and ability to meet outlook, analysts warned on Friday.

The Nasdaq-listed shares of the BlackBerry maker tumbled about 21 percent in pre-market trading.

On Thursday, the company posted a sharp drop in quarterly profit, painted a dismal picture for the current quarter and said it now expects to reach only the lower end of an already reduced full-year outlook.

"While the RIMM bulls have long pinned their hopes on international growth offsetting North America declines, this quarter largely defeated that thesis, as international revenues are now also in steep decline," Goldman Sachs analyst Simona Jankowski wrote in a note to clients.

Second-quarter revenue from international operations, excluding UK, fell 15 percent from the previous quarter -- proof that the decline in RIM's market share is not constrained to the U.S. and UK markets.

RIM's BlackBerry -- once a byword for corporate communication -- has lost ground to Apple Inc's iPhone and devices running Google Inc's Android software.

Goldman estimates RIM's global market share declined to 9 percent in the second quarter from 16 percent a year ago.

"The North American market share losses persist and we believe this trend is starting to spread to international markets... with slow signs already in UK," Sanford C. Bernstein analyst Pierre Ferragu wrote in a separate note to clients.

Yet, RIM's management remains in "blatant denial," said Bernstein's Ferragu, who believes the company's outlook for the third quarter and the full year appears "unrealistic."

"The co-CEOs do not recognise the failure of the Playbook and continue to sell its merits in terms of security," he said, noting that PlayBook tablet computers shipments fell from 500,000 to 200,000 units in one quarter.

PLAYBOOK A "DISASTER"

RIM's Co-Chief Executive Mike Lazaridis, in a conference call after the results, said he was confident that RIM was on track to return to growth in the third quarter, while co-CEO Jim Balsillie promised a software upgrade he dubbed PlayBook 2.0.

But National Bank Financial analyst Kris Thompson called the PlayBook "nothing short of a disaster" and said RIM now needs to spend money to promote the PlayBook in order to move inventory.

Thompson was also concerned about the smartphone maker's cash flow after the company announced plans to raise its existing credit facility to $500 million from $100 million. RIM is set to burn $300 million this fiscal year, he estimated.

National Bank's Thompson downgraded RIM to "underperform" from "sector perform," while Raymond James analyst Steven Li cut his rating on the stock to "market perform" from "outperform."

In a separate note, Citigroup analysts Jim Suva and Kevin Dennean, who rate the stock "sell," said RIM's margins were under pressure as carriers shift their promotion spending to Android and Apple.

"Promotion commotion hurts gross margins and we don't see it getting better," they said.

Analysts at Barclays Capital, Susquehanna, CIBC World Markets, Raymond James, Wedbush Securities and Canaccord Genuity cut their price targets on the stock.

(Reporting by Tenzin Pema in Bangalore; Editing by Maju Samuel and Joyjeet Das)

FILED UNDER:

INTERNAL SECURITY

REUTERS SHOWCASE

Setback For Sahara

Setback For Sahara

Supreme Court defers verdict on Sahara plea to raise more debt on hotels  Full Article 

SpiceJet Crisis

SpiceJet Crisis

SpiceJet says fleet grounded on lack of fuel  Full Article 

Drug Patents

Drug Patents

Novartis sues Cipla over respiratory drug Onbrez   Full Article 

Boost for Tata Steel

Boost for Tata Steel

Tata Steel restarts key iron mines amid shortage  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

India Outlook

India Outlook

ADB trims growth forecasts for developing Asia, says India to grow 5.5 pct in 2014  Full Article 

Real Estate

Real Estate

HDFC to raise $500 mln real estate private equity fund - sources  Full Article 

Banking Sector

Banking Sector

Japan banks to bulk up India presence on improving ties   Full Article 

U.S. Spending Bill

U.S. Spending Bill

Obama signs bill $1.1 trillion government spending bill  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage