RIM shares battered by worries over Cisco outlook
OTTAWA (Reuters) - Research In Motion (RIM.TO) (RIMM.O) shares sank as much as 12 percent on Thursday amid fears that the BlackBerry maker would be hurt by the sharp drop in demand from U.S. banks that is hitting Cisco Systems.
Cisco (CSCO.O), the world's top maker of routers, switches and other equipment, said it had seen "dramatic decreases" in orders from U.S. banks as it reported financial results on Wednesday.
That triggered concerns about its growth prospects and sent the company's shares plunging.
"Everyone heard Cisco's comments that the financial services sector was weaker than they expected, and they're trying to translate that into RIM," said Canaccord Adams analyst Peter Misek.
"What they forget about is that RIM's subscriber base is 14-15 percent financial services -- that's it. Their largest customer is actually the government."
The government represents close to 20 percent and retail consumers about 30 percent, he said.
"Profit-taking, I think, has also got something to do with it, they've had a great run and folks are raising cash," Misek said. "It was overbought before, so now it's oversold."
The stock was off 6.4 percent, or $8.55, to close at $124.48 on Nasdaq and down 5 percent, or C$6.42, at C$117.10 on the Toronto Stock Exchange.
"The armor has been penetrated," said one analyst who asked not to be named. "It just goes to show you what investors will do when they get a little bit panicked."
The sharp drop comes just one day after RIM passed Royal Bank of Canada (RY.TO) as the country's most valuable company in terms of market capitalization.
Media reports said it was worth C$69.1 billion ($73.6 billion) at market close on Wednesday versus C$65.9 million for
RBC.
TD Newcrest analyst Chris Umiastowski downgraded RIM to "hold" from "buy" on October 24, citing strong stock price appreciation as the shares have more than tripled in the last 12 months.
The market overreacted to RIM's recent distribution deal in China, he said in the note, adding that rivals continue to pose risks to RIM's growth. He lifted his stock target to $130 from $115 on estimate revisions.
($1=$0.93 Canadian)
