Goldman Sachs Boosts RIMM to Neutral From Sell
Research in Motion (NASDAQ: RIMM) got a boost on Wednesday as Goldman Sachs upgraded the stock to Neutral from Sell in a report published early Nov. 16. At the time of writing, RIMM is up 3.5 percent at 19.80 per share. While the current price is a far cry from the $70s at the end of February, it does appear to mark a possible inflection point from the still-aching $17.17 low reached just last Thursday.
What changed for RIMM? Not much, as the change in Goldman's rating does not come from improved expectations on earnings, but rather from a change of valuation from the P/E method, currently at 3.8X, to sum-of-the-parts. According to Goldman, this “is a more meaningful valuation methodology at this stage, given the company's likely rapidly declining earnings trajectory.” Thus, in addition to the rating upgrade, Goldman also lowered its 12-month price target from $22 to $18.
While we have yet to see if any other institutions are to follow its lead, Goldman appears to be operating under an assumption that RIMM is approaching some type of wake-up call in light of intense competition it has faced for quite a while, without exacting any response that would be characterized as meaningful in the market's view.
iPass, a provider of single-log-on services for remote workers, found out that for the first time, Apple overtook Research in motion in number of smartphones in the corporate world. The survey of over 2,300 iPass customers revealed that iOS comprised 45 percent of smartphones in the workplace as opposed for 32 percent for Blackberry. Interestingly, this survey reveals the iPhone penetration to be out of the preference of employees to bring their personal smartphone to work—fully 42 percent of employees thus provide their own kit, to be integrated and managed by the company. The moral of this story is, RIMM has to engage itself to tugging into the heartstrings of individual consumers as a catalyst to reverse the trend in the corporate arena.
RIMM may have started to heed those calls. The company announced two new Blackberry models today, the BlackBerry Curve 9380 and the Bold 9790. While the Bold has a touch display as well as a full QWERTY keyboard, the Curve is said to be an all-display smartphone with no keyboard or physical buttons. It is the first serious indication that RIM is looking to diversify its portfolio to reach users beyond its loyalist base.
As these products make it in the market in the next few weeks, we will find out if consumers would be compelled to own them regardless of whether they will be employer-subsidized. That may well be where RIMM's inflection takes strength.
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Tags: Goldman Sachs