RIM debacle ‘symptomatic of RIM’s failure’ to address key challenges

Research In Motion still has a few big-name firms in its corner — Macquarie is one example — but even long-time supporters seem to be losing patience with the Waterloo, Ontario-based vendor. “We don’t see valuation improving until RIM addresses four key issues, which we think keep investors from properly valuing the company,” RBC Capital Markets analyst Mike Abramsky wrote in a note to investors on Tuesday. “We view recent Q2 results as symptomatic of RIM’s failure to address these challenges.” Abramsky goes on to list four points RIM must address in order to right the ship, the first of which is escaping its tendency to launch “backwards-looking, uncompetitive products and software.” Read on for more.

“Four years after iPhone launched, RIM still hasn’t launched competitive Smartphone innovations or addressed its ‘app gap’,” the analyst noted. “With QNX, we believe RIM needs to renew its focus on innovative, bold user experiences.” The second key challenge RIM faces is lack of marketing and poor execution, which Abramsky says are allowing competitors to pass RIM by. “RIM continues to ship products late (e.g., BlackBerry 7) and incomplete (PlayBook minus 3G/email, underpowered Torch 1; Torch 9850/9860 with inferior virtual keyboard, etc.). RIM needs to improve execution as competitors are bringing their ‘A’ game, and have out-maneuvered RIM on marketing, positioning it as passé.”

Number three on Abramsky’s list is improving credibility and visibility with investors. RIM’s inability to provide reliable guidance has created “a formidable credibility gap with the investment community that needs correcting,” according to the analyst. One key are where RIM might regain confidence from investors takes us to Abramsky’s fourth and final challenge: governance. “To us, RIM’s board has an opportunity to take a more active role in providing a ‘check and balance’ on key management decisions,” the analyst wrote.

RBC lowered its fiscal 2012 and 2013 EPS estimates to $4.95 and $5.00 from earlier estimates of $5.60 and $6.15. The firm also slashed its price target on RIM stock to $29 from $35 on lower earnings outlook, reiterating its Sector Perform rating.

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