Analysts at Morgan Stanley are painting a grim picture for Research in Motion, sending share prices of the ailing smartphone maker down to around $9.00 per share. The analysts suggest that RIM faces some tough choices ahead if it is to emerge once more as a competitor in the smartphone market.
“We believe the only way RIM remains a viable entity is at a fraction of its current size, a transformation that erases much of its earnings power. The next 9 months likely see rapidly deteriorating fundamentals on the one hand offset by stories of potential strategic options on the other.” - Morgan Stanley Analysts
A few months ago, RIM announced that it would likely face significant losses in coming quarters ahead of its BlackBerry 10 platform release in the fall, and has started axing employees to save money. It further painted a bleak picture by announcing that it had hired RBC Capital and JPMorgan as financial consultants to figure out a strategic business direction for the company, which could include the selling of all or part of RIM to competitors. Rumors this morning suggest the handset business is on the chopping block, leaving the software services in-house.
RIM still believes that BlackBerry 10 will be its ticket out of the dumps, though analysts are souring on that idea after initial positive reactions to the upcoming platform. Morgan Stanley believes that BlackBerry 10 is too little, too late, especially if it misses the key back to school season, a hot shopping season for the smartphone market. Adding insult to injury, the analyst report added the following outlook on the company.
“We believe the fundamental story at RIM is essentially broken. In this volatile cocktail of a situation, and in light of our experience with Motorola prior to its strategic split 18 months ago, we are more comfortable rating the stock Underweight as after all the inevitable ups and downs to come in the stock, we believe the long-term value of the business, by the time anything strategic can actually be worked out, is still below the current level of the stock.” - Morgan Stanley Analysts
There are growing rumors that developed over the weekend which suggested that the company may be drawing ever nearer to a full or partial sale. If Morgan Stanley is to be believed, such a move could be imminent.
[via The Wall Street Journal]