BlackBerry Reports Buoy RIM
Bullish News About the Company's New Phones Lifts the Firm's Stock Price
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TORONTO—Investors have punished Research In Motion Ltd. RIM.T +2.50% for the better part of a year for a series of delays in launching its next BlackBerrys, devices the company says will make it competitive once again with smartphone leaders Apple Inc. AAPL +3.06% and Samsung Corp. 000830.SE +3.42%
But suddenly, a new bout of stock-market optimism, fueled by a series of bullish reports about the phones' prospects, is buoying RIM shares. On Monday, RIM stock rose 32 cents, or 2.74%, to $11.98 a share, in New York. That caps a 30-day rally during which the stock has risen 55%. In the past three months, RIM shares are up 70%.
Thorsten Heins discussed RIM's new operating system in September.
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Earlier this month, RIM said it would introduce two phones, powered by a new operating system called BlackBerry 10, on Jan. 30. The Waterloo, Ontario, company hasn't provided many other details, including when the devices will hit store shelves, how they will be priced and which carriers will offer them.
RIM has been showing prototypes of the new phones to customers, reporters and analysts. It has also shipped the devices to some 50 carriers, who are now testing them to make sure they will work seamlessly on their networks—a critical step in any new smartphone rollout. RIM Chief Executive Thorsten Heins has said carriers have embraced the new device, though so far the carriers haven't commented publicly on their testing.
Still, several analysts who have seen RIM's new operating system are giving it positive reviews. Some are citing their own conversations with carriers. In the wake of these reviews, many are revising earlier, pessimistic forecasts that RIM will continue to bleed market share and might start seeing declines in global subscribers.
CIBC World Markets analyst Todd Coupland wrote in a note to clients Monday that RIM is "materially undervalued," and he raised his target price for the company to $17 a share from $8. Mr. Coupland said he thinks the stock will continue to rise as RIM expands its marketing push for the new phones.
He also said he believes that enough of RIM's existing 80 million subscribers will upgrade to the new phones to bolster recent, flagging sales. CIBC now estimates RIM will ship 41.4 million phones in fiscal 2014, compared with 30.2 million in fiscal 2013, which ends in March.
Scotia Capital Inc. analyst Gus Papageorgiou said he now thinks RIM could ship 18.6 million phones in its next fiscal first quarter, up from 7.4 million in its fiscal second quarter.
RIM has also attempted to improve relations with application developers, an aspect of the business that RIM executives concede was often lackluster in the past. The company has given developers free prototypes of its new phones in an effort to get them to develop apps. RIM is also offering cash rewards for successful apps.
Whether these efforts will pay off won't become clear until Blackberry 10 phones come to market next year, and RIM has a long way to go to catch up to other phone makers' app offerings. RIM has more than 100,000 apps in its app store, compared with more than 700,000 apps for the iPhone.
And not all analysts are buying the turnaround potential.
"I think they're going through a little bit of a honeymoon phase," Raymond James analyst Steven Li said. "Now that [RIM has] set a launch date, it's fair to think there aren't going to be any more delays. You might even get some tech blogs saying maybe [the new phones] aren't too bad. So your coverage becomes less negative."
