Friday, February 13, 2009

Research in Motion (NASDAQ:RIMM): Downgraded to Underperform at CSFB

CSFB downgrades Research in Motion (NASDAQ:RIMM) to Underperform from Neutral as they lower their FY10 EPS estimate for RIM by 20% to $2.94 and introduce a below consensus FY11 EPS of $3.46. Firm's target price falls to $37 (from $45) representing 20% downside potential.

Lower smartphone estimates, RIM share gains to moderate. CSFB lowers smartphone industry volume forecasts to 154mn/177mn in 2009/2010 (+9.4%/+14.7% respectively) amid signs of slowing smartphone growth and concerns over affordability (total cost of ownership remains around $800).They maintain their view that RIM’s share gains will slow given share loss in North America, offset by some traction internationally. Globally, they expect RIM’s smartphone market share to be 17.0%/17.4% in CY09/CY10 respectively, leading to unit volumes of 26mn/26.3mn in FY09E/FY10E.

Less leverage than expected. CSFB believes that hardware GM may languish at around 35% for FY10 leading to a group OM of 20.9% with risks to the downside given several structural factors. 1) teardown analysis for the Bold 9000 and the Storm 9530 shows that RIM’s bill-of-materials (BOM) on new products is structurally higher than that of older platforms (Curve) and competing products (the Bold’s BOM is 55% higher than that of the E71). 2) see signs of aggressive pricing from RIM for virtually all recent product introductions driving double digit ASP declines. 3) see a rising IPR burden for RIM in WCDMA. 4) believe that RIM may need to retool its chipset strategy at some point, thereby driving R&D spending higher.

Notablecalls: Note the call was out YESTERDAY around market close. It will probably cause some damage to RIMM's stock price. Given I think the market should be faded this morning, RIMM would be the best instrument to use.

I does not look like things will get better for RIMM anytime soon.

1 comment:

The HardHead said...

Good read of RIM vs AAPL at CNBC