Is Research in Motion still a good bet?

TORONTO Fri Jun 25, 2010 11:08am EDT

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TORONTO (Reuters) - Shares of Research in Motion RIM.TO were hammered on Friday after the BlackBerry maker reported weaker-than-expected quarterly shipments, but analysts are split about the company's prospects going forward.

While some believe the company's fortunes will rebound with the launch of new high-end models in the current quarter, others argue that competitive pressures will continue to weigh on the company's stock.

BUY

RBC Capital Markets analyst Mike Abramsky, who has a "Top Pick" rating on RIM, believes that the onus is on the company to execute and regain investor confidence.

"We expect valuation to remain range-bound near term on competitive concerns, but for sentiment to improve with rising visibility to improved competitive position and execution," said Abramsky.

In a note to clients, Abramsky concedes that RIM does face stiff competitive pressures, but he believes the company could have a strong second half in calendar 2010, on the back of its planned product launches later this quarter.

Abramsky argues that RIM is well-positioned within a large and under-penetrated global smartphone market.

SELL

Citigroup analyst Jim Suva, who has a 'Sell' rating on the shares BlackBerry maker, argues that RIM's fiscal first-quarter earnings could well mark the company's earnings peak, as rivals continue gain market share at RIM's expense in North America.

"We believe that RIM shares will experience pressure from the need for RIM to increase its marketing and promotion spending as carriers are shifting their marketing and promotion to some other handset makers," said Suva, in a note to clients.

"We believe consensus expectations are too high and the launch of the Android platform coupled with continued share gains of the iPhone both with strong application stores and enhanced user experiences will pressure RIM's consumer growth," he added.

Suva, who lowered his price target on RIM to $50 from $55, believes that RIM's presence in the corporate world could also come under pressure, as some companies are beginning to allow employees to switch to Apple's (AAPL.O) iPhone or Android-based devices.

"We expect (RIM) to continue to be profitable and make money, but we expect its earnings growth and profit leverage to meaningfully slow."

(Reporting by Euan Rocha; Editing by Frank McGurty)

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