RESEARCH IN MOTION could run out of cash and ultimately fail, even with the launch of its now-delayed BlackBerry 10 device early next year, Wall Street analysts said.
At least 10 brokerages cut their price targets on the stock, some by as much as 50 per cent, a day after the company reported worse than expected quarterly results and said it would delay the launch of its next-generation device to early 2013 from late this year.
RIM shares were down 16 per cent in pre-market trading on the Nasdaq. “If RIM continues to be run as it is, we believe that the company will eventually fail,” Nomura Equity Research said.
“We do not expect RIM to successfully drive a turnaround of its financials, even with the launch of BB10 next year,” the brokerage said in a note to clients, adding that its model assumes RIM disappears by 2020 in a gradual decline.
BlackBerry 10, considered to be RIM’s make-or-break product, was originally slated to be launched in the first quarter, and the delay has already contributed to a 40 per cent drop in the company’s stock price so far this year.
“Given RIM’s cash burn, BB10 can’t come soon enough,” Barclays said in a note to clients.
Analysts at Citi Investment Research and Jefferies slashed their price targets on the stock to $5 for RIM’s US-listed shares, a fall of 45 per cent from Thursday’s close.
“We believe fundamentals continue to get worse and RIM could run out of cash and need to raise capital within two years implying that as time rolls forward, if we are correct, the value of RIM continues to go lower,” the Citi analysts said.
“We expect more write-offs and impairments to RIM assets and we question if RIM’s new BB10 products will even matter as it may be too little too late,” the analysts said, adding they expected the company’s smartphone sales growth to be less than half of the industry average in 2012.
RIM said it would lay off 5,000 workers, about 30 per cent of its workforce, as it tries to save cash, although some analysts noted that this would come at a short-term cost.
Citi said it believed the company should be hiring instead of firing to get its products out on time. – (Reuters)
