ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day.
Canaccord Genuity analyst Michael Walkley doubled down on his previously pessimistic view for Research in Motion, slashing profit estimates, reiterating a $9 target price and mapping out a strategy for a potential acquiring firm.
Mr. Walkley's report this morning updates BB10 sales projections to reflect that intial U.S. sales will be delayed until March. He notes the mid-March launch south of the border will coincide with stiff competition from the new Samsung Galaxy S IV. This, combined with reports from the United Kingdom indicating decent but not blowout sales of the new BB10 devices, led Mr. Walkley to drop sales estimates for the current quarter from 1.75 million units to 300,000. As a result, his 2013 earnings-per-share forecast declined by 8 cents to $1.10 and the 2014 estimate fell 23 per cent to 62 cents.
The majority of the report detailed RIM's potential value to Google or Microsoft as an acquisition. Inherent in Mr. Walkley's view is that the company should put itself on the block quickly before the underlying value of the firm erodes.
"We believe BlackBerry's higher ARPU [average revenue per unit] enterprise subscriber base is roughly 18M of the total 80M subscribers, and we believe this 18M base would be valuable to a competing ecosystem such as Windows or Android. …[but] we believe this enterprise ARPU remains under considerable pressure from the growing BYOD (bring your own device) trend," he said, referring to the growing trend among companies to let employees use devices of their own choosing.
Mr. Walkley is unconvinced on the sustainability of the RIM's consumer business. " Blackberry's … consumer subscriber base holds little value in an acquisition due to our belief that this base is already at risk longer term to competing ecosystems," he writes.
With profits threatened in the enterprise business and the consumer operations seen as unsustainable, we don't have to spend too much time reading between the lines of Tuesday's report. Mr. Walkley clearly believes that the RIM's best days are behind it and the company should get whatever price it can now before things get worse.
Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Scott on Twitter at @SBarlow_ROB.
Scott Barlow