Research in Motion Ready for Tough 2009 - Scotia Capital

2009 is going to be a tough year for the handset market, says Scotia Capital analyst Gus Papageorgiou, but with the rocky launch of BlackBerry Bold and Storm behind it, Research in Motion Ltd. (RIMM) looks well positioned to handle the tough times and grow their business in the process.

Mr. Papageorgiou said in a note to clients:

Concerns over the industry in 2009 have been foremost in many investors' minds. These concerns centre around both the potential for growth and the impact of a fiercely competitive environment on handset margins.

That said, Mr. Papageorgiou concludes that the handset market, which is expected to see a net decline in volumes of 10%, will reward the Smartphone market at the expense of the legacy mobile phone makers.

The analyst told clients that names like Motorola (MOT), Samsung (SSDIF.PK), LG Electronics (LGERF.PK) and Sony Ericsson will experience a sharp decline in volumes next year, while Nokia Corp. (NOK), Research in Motion and Apple Inc. (AAPL), will continue to gain traction in the market with their more "intelligent" devices.

He said:

So, while there is little doubt the entire handset market will be under pressure in 2009, it is the traditional handset market that will bear the brunt of the decline. The Smartphone market, and the players focussed on this segment are likely to continue to see growth.

Mr. Papageorgiou told clients that he expects Research in Motion to report inline third quarter results on Thursday including revenues of $2.767-million, earnings per share of $0.81, 6.5 million handsets and 2.6 million subscriptions.

He said guidance for the fourth quarter should be solid as well, with revenues hitting $2.9-billion and EPS of $0.87. He estimates 7.1 million devices will be sold in Q4 with 2.9 million subscriptions added.

The Scotia Capital analyst said:

Q4 will enjoy an almost completely refreshed product line including the touch-screen Storm, the new Curve 8900, the Bold in the U.S. market and the flip-Pearl. Now that these devices have launched we believe revenue predictability will improve.

Mr. Papageorgiou has "sector outperform" rating and a one-year price target of C$105.

Comments

[jenny:]

With the rocky Storm release behind them I think RIMM is set up for a good year at the smartphone market gains. RIMM was forecasted to close up today at (www.predictwallstreet....) and these forecasts have been beating the market by 65% lately. Sentiment appears to be becoming bullish, setting them up for a good end of the year.

2008 Dec 17 02:43 PM