UPDATE 3-RIM swoons on grim results, shareholders fret

Fri Jun 17, 2011 4:19pm EDT

 * RIM results trigger 21 pct slide in its shares
 * Some of biggest shareholders show signs of bailing
 * Citigroup cuts to "sell" from "hold", JP Morgan lowers
 * CIBC, BMO, 7 others cut price targets
 (Adds link to Breakingviews, updates share price to close)
 By Alastair Sharp
 TORONTO, June 17 (Reuters) - Research In Motion's RIM.TO
RIMM.O dismal results and failure to deliver exciting new
devices on time pushed its shares down more than 20 percent on
Friday and drew parallels with other fallen technology stars.
 The BlackBerry maker's shares plummeted below $28, hitting
the lowest level in almost five years, after the company missed
some of its own limp forecasts and reported a drop in profit.
 It was RIM's sharpest one-day decline since September 2008
in trading volumes among its heaviest ever. The shares are down
more than 60 percent since February, wiping billions off its
market value.
 Even more worrying, some of the company's largest
shareholders are showing signs of bailing out.
 One of RIM's biggest investors, Jarisloswky Fraser, has
already cut its stake in half, according to Bloomberg.
 Another gave RIM six months to get its house in order.
 "I think in the next six months we'll have a much better
idea of where we stand," said the head of a fund with a major
stake. "They've laid out a business strategy and we're
measuring their ability to execute."
 LOWER TARGETS
 At least 14 analysts lowered their price targets for RIM,
most of them highlighting what appears to be a once-dynamic
product development pipeline that's running dry.
 RIM admitted delays in revamping an aging smartphone lineup
and slashed what most analysts viewed as an unattainable full
year earnings outlook. It also said it planned to cut an
unspecified number of jobs. [ID:nN16217792]
 "Bottom line, we believe RIM has no short-term fixes to
improve product portfolio, brand perception, to reinvigorate
share gains, revenue growth and profitability," Citi's Jim Suva
wrote in a note to clients.
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 Graphic on key RIM metrics    r.reuters.com/ner22s
 Palm reading could foretell RIM's fate    [ID:nN17179108]
 Amid struggles, talk of change at top    [ID:nN27162387]
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 RIM's difficulties bear a striking resemblance to recent
troubles at Finland's Nokia (NOK1V.HE), another struggling
national technology champion blindsided by the roaring success
of Apple's (AAPL.O) iPhone and handset makers using Google's
(GOOG.O) Android software. [ID:nL3E7H603G]
 Some analysts drew comparisons between RIM and Nortel
Networks (NRTLQ.PK), the once-mighty Canadian equipment maker
that went into bankruptcy and is selling its final assets.
 RIM's co-chief executives both sounded contrite on a
conference call with analysts. But analysts said neither
appeared to fully comprehend the challenges that lay ahead.
 "The company is facing its greatest challenge, maybe in its
history, and each CEO continues to believe there is
unprecedented interest in their products," Deutsche Bank's
Brian Modoff wrote as he cut his price target to $20 from $45.
 JP Morgan downgraded to "neutral" from "overweight".
 "Until we see some evidence that product development is on
track and visibility is returning we would advise investors to
find other places to invest," its analyst Rod Hall said.
 RIM's delay launching a touchscreen version of the Bold
model and at least one other device, now due by late August,
threatens its hard-won relationships with North American and
European carriers, which expected the phones in July.
 "We are concerned that RIM may have given them overly
optimistic launch timetables, which may end up alienating"
them, said Tero Kuittinen, an analyst from MKM Partners.
 Cellular-enabled versions of RIM's PlayBook tablet, which
would give carriers a reason to push the iPad competitor,
aren't expected until autumn, from a prior summer timeframe.
 LEADERSHIP QUESTIONS
 The dim results and outlook also fanned questions about
RIM's co-chief executives.
 Deutsche's Modoff was disappointed that neither Mike
Lazaridis nor Jim Balsillie described the planned job cuts as a
reorganization -- which he would view as a positive.
 Both brushed off criticism of RIM's dual chief structure
with what seemed "more of a staged piece of theater than a
serious answer to a serious strategic question," Modoff said.
 RIM has cut staff before, in a 2002 move still known around
its Waterloo, Ontario, headquarters as the "10 percent purge."
That followed a dip in revenue and spiraling costs as it
started selling its early BlackBerry phones via carriers.
 But it's been all growth since then, with RIM now boasting
more than 17,000 employees, up from 14,000 a year ago.
 BRIGHT SPOTS
 There were bright spots in the first quarter results,
including 500,000 PlayBooks shipped. International revenue grew
67 percent partly on the back of RIM's BlackBerry Messenger
instant messaging service. But that appeal may not be enough.
 "The concern is the sustainability of that low-end market
that is working for them now. I'm not sure over the long haul
if that texting arbitrage is going to keep them afloat," said
Matthew Robison from Wunderlich Securities, who suggested RIM
may retract into a niche space serving corporations.
 RIM's U.S.-listed shares closed down $7.58 at $27.75. The
shares fell $7.13 to C$27.24 on the Toronto Stock Exchange.
 The table below lists some price target changes on RIM's
US-listed shares:
 BROKERAGE       PRICE TARGET      RATING
              New  Old (In US$)      
 Barclays        52   77           Buy  
 BMO             55   80           Buy  
 Caris           40   70           Hold *
 Citigroup       25   45           Sell *
 CIBC            65   75           Buy  
 Deutsche        20   45           Sell 
 Evercore        35   60           Hold *
 Jefferies       24   35           Sell 
 JP Morgan       30   40.5         Hold *
 MKM Partners    32   62           Hold *
 National Bank   25   40           Sell 
 Scotia          57   80.7         Hold *
 Sterne Agee     27   41           Hold 
 Susquehanna     28   31           Sell 
 ThinkEquity     32   42           Hold 
 UBS             41   45           Hold 
 * = downgrade
 (Additional reporting by Soham Chatterjee and Tenzin Pema in
Bangalore; Editing by Frank McGurty and Janet Guttsman)


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