Increased Competition Threatens Research in Motion

Includes: BBRY, GOOG, PALM, VZ
by: Market Blog

Citigroup analyst Jim Suva isn't happy about Research In Motion Ltd. (RIMM), and on Monday he downgraded the stock to "sell."

Investors dumped the shares Monday in response to Mr. Suva's bearish report. The Nasdaq listing is down $3.55, or 6%, at $55.18, while the stock in Toronto fell $4.33 (Canadian), or nearly 7%, to $59.49. That represents a seven-month low for RIM's stock, which has been in a freefall since trading above $90 as recently as late September.

Mr. Suva's big worry? New gadgets from RIM's competitors, most notably Motorola's (MOT) Android handheld device, look set to steal the limelight away from RIM's famed Blackberry - and just as consumers start sniffing around for cool new toys for Christmas, to boot.

"Increased competition with more attractive devices and applications pressures RIMM’s growth," Mr. Suva wrote.

He added that some big spending by telecom carriers to promote Blackberry products is winding down, while big carriers Verizon (NYSE:VZ) and T Mobile are stepping up their own promotions of the Android with major launches this week.

By contrast, he said, RIM's own new innovations, including its new Blackberry Storm 2 device and improved applications, "are minor evolutions at a time when the industry and competition is seeing major revolutions of applications and improved customer mobile experiences."

For similar competitive reasons, Mr. Suva also downgraded another device maker, Palm Inc. (PALM) to sell" from "hold." Palm's stock was down 4.5% in afternoon trading on Monday.

He upgraded Motorola to "buy" from "hold", raising his target price to $10.50 (U.S.) from $8.57. The stock was up 35 cents, or 4.2%, at $8.93.