Breakup value is the only reason to own RIM, says Cormark analyst Tse

On Thursday, after the market close, Research in Motion (TSX:RIM) will report its Q2, 2013 results. The news for BlackBerry fans is not expected to be better than the company’s Q1 results, which were a veritable grab bag of disappointment.

In that quarter, the Waterloo company lost $518-million on revenue of just $2.8-billion, pushed the release of its BlackBerry 10 platform back, and announced it would lay off 5000 people.

RIM’s stock closed at $9.46 on June 28th, the day of the Q1 earnings announcement, and has since fallen to barely more than $6. So the worst is behind the BlackBerry maker, right? Not so fast.

Cormark Securities analyst Richard Tse says it is no surprise that RIM’s Q2 will be dismal. The only question he says, is “how dismal?”. Tse says the very timing of the earnings release hints at some potential problems. He wonders if the company’s developer conference, BlackBerry Jam, is this year being held during the earnings release to draw attention away from bad press associated with what is expected to be a terrible quarter. The conference, he points out, is normally held after the Q2 results.

The bottom line, says the Cormark analyst, is that RIM has at least a couple more tough quarters after this one before BlackBerry 10 is released. Even then, he says, there are no guarantees that the platform will be the white knight the company needs. Tse believes that other than the potential breakup or buyout scenario there is no reason to own RIM, because its fundamentals are rapidly deteriorating. In a research update to clients this morning, Tse reiterated his Market Perform rating and $10 target on Research in Motion.

Tse says the hope that RIM can occupy a vital third option in the wireless ecosystems behind iOS and Android is not a pipe dream. In fact, he says, a number of carriers are hoping RIM can come back strong with BlackBerry 10 and fill the void. But at this point, he says, barring “some Herculean execution” from RIM, Windows Mobile will be the platform to get that nod.

Tse is expecting RIM’s smartphone shipments for the quarter to come in at 6.5-million units, down from 10.6-million in the same period last year. He believes the company will lose $.54 cents on revenue of $2.5-billion.

Shares of Research in Motion on the TSX closed today down 1.1% to $6.18.

About The Author / Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Comment

One thought on “Breakup value is the only reason to own RIM, says Cormark analyst Tse”

svg1234 says:

September 24, 2012 at 2:00 pm

“He wonders if the company’s developer conference, BlackBerry Jam, is
this year being held during the earnings release to draw attention away
from bad press associated with what is expected to be a terrible
quarter.”

What an incredibly stupid thing to say. As if the information wont’ be widely disseminated and analyzed? lol. Really, how can you take this guy seriously when he says something so dumb?