RIM stocks close at a five year low

MONTREAL – Research In Motion seems to have become a victim of timing on the launch of its new BlackBerry smartphones, causing investor selloffs and raising questions about whether it can still compete against Apple and Android devices, say analysts.

“RIM’s core problem is that they don’t have any new phones to sell,” said PC Magazine analyst Sascha Segan.

Shares in Research In Motion’s fell to their lowest level since 2006 on Friday, plunging more than 20 per cent in extremely heavy trading as company’s relevance was questioned.

“The mobile market moves so fast that phones released a year ago already look old,” Segan said from New York.

On Thursday, Research In Motion (TSX:RIM) announced plans to cut jobs as it works to roll out new smartphones and updated tablets in the months ahead to compete with Apple and Google’s Android operating system devices.

Research In Motion said its upgraded BlackBerry Bold and BlackBerry Torch smartphones will be available in late summer, acknowledging it will miss a big chunk of the back-to-school selling season. A new, more powerful generation of BlackBerrys with the same operating system as the PlayBook tablet won’t be available until early next year.

“At the end of the day, you have to put new products on your shelves,” said Segan, managing editor of PCMag Mobile in New York.

“I see people really perceiving this as yesterday’s company that can’t get its act together to compete with the latest products.”

The Waterloo, Ont., company has already cut profit forecasts for this year. The rollout of its PlayBook tablet came with little fanfare and lukewarm reviews in April, on the heels of the much-publicized launch of Apple’s iPad 2 _ which flew off store shelves and has remained one of the hottest tech gadgets on the global market.

RIM stock closed down $7.13, or 21 per cent, at $27.24 on the Toronto Stock Exchange, with 18.6 million shares traded, making it the second most active issue on Toronto’s main board.

RIM shares haven’t been below $30 on a split-adjusted basis since August 2006.

BMO Capital Markets analyst Tim Long lowered his earnings’ estimates for RIM but remained positive overall.

Long said RIM’s transition to new products is having a “deeper” impact than expected but he still sees value in the company and in its new products.

“This does not change our view that new products will reinvigorate growth and that there is a lot of unique value within RIM,” Long said in a research note. “We remain positive, but don’t expect the stock to outperform for a few quarters.”

Not all analysts were so generous.

“We do not believe RIM is accurately portraying the increasingly competitive smartphone environment,” said Canaccord Genuity Analyst Michael Walkley.

“In fact, we believe the focus on launching the PlayBook ahead of its core BlackBerry products is more to blame for the poor financial results than the corporate structure,” Walkley said in a research note.

Analyst Anil Doradla said RIM  is a “victim of the hypercompetitive smartphone industry” and the company has had to reset expectations, undermining investor confidence in the timing and competitiveness of its new products.

Doradla said blame for RIM’s coming job cuts has to rest with its leadership.

“The jobs cuts are nothing but an outcome of poor execution at the top,” said Doradla of Chicago-based William Blair & Co.

UBS Investment Research lowered its price target to US$41 per share. It said the earnings targets for the second half of the current financial year are a stretch but “much of the bad news is out for the time being.”

The median price for analyst estimates on Thursday, prior to the RIM’s quarterly report, had been US$45 per share according to figures compiled by Thomson Reuters.

In its financial results, RIM said it earned US$695 million or $1.33 per diluted share for the quarter ended May 28 on $4.91 billion in revenue. It had lowered its financial guidance for the quarter in April.

That compared with a profit of $769 million or $1.38 per diluted share a year ago on $4.24 billion in revenue.

The average analyst revenue estimate had been for a profit of $1.33 per share, according to data compiled by Thomson Reuters.

During the quarter, RIM said it shipped approximately 13.2 million BlackBerry devices and approximately 500,000 PlayBook tablets.