By Sheena Lee
Research In Motion (RIMM) has struggled to impress Wall Street in the last few quarters amid fierce competition from the likes of Apple (AAPL), but now, a partnership between Nokia (NOK) and Microsoft (MSFT) could mean near-term opportunities for the BlackBerry maker, said analysts.
Last week, Nokia announced that it has decided to adopt the Windows 7 mobile operating system onto its smartphones, and many analysts agreed that the switch could cost the Finnish mobile giant a part of its market share. Consumers who wanted to buy Nokia smartphones may opt for BlackBerries instead.
The median price based on the most recent targets we tracked is $78.50, up from $70 in our December prognosis. The mean target has risen to $78.79 from $71.92. RIM closed Thursday at $69.69.
Citigroup’s Jim Suva is leading a bullish target for Research In Motion. He upgraded the stock to Buy from Sell and hiked his price target to $80 from $56. "Nokia is completely changing its strategy to now embrace the Microsoft mobile operating system thereby creating a multi quarter gap in Nokia products and carrier promotion support," he said.
"We met with several international carriers at Mobile World Congress in Barcelona Spain this week who commented on their forthcoming shift to promote other handset OEMs (Android, Apple and RIMM) until Nokia’s product strategy is more realizable," noted Suva.
National Bank Financial’s Kris Thompson said he believes RIMM could "steal" 1 million units per quarter from Nokia during the transition. This would add about $1.2 billion in revenue, or 30-40 cents a share to his fiscal 2012 RIMM earnings forecast, he said."We’d be buying RIMM on any perceived long-term competitive threat on this news," he said.
It could take Nokia two years to adapt its system, and according to Morgan Stanley’s Ehud Gelblum, together, Nokia and Microsoft could create a legitimate app ecosystem to compete with iPhone and Android. "This in turn, could compel RIMM to 'plug in' to the existing Android apps library," he said. "Such a move would greatly expand the number of third-party applications available on the BlackBerry, putting it on a more level playing field with the industry leaders." Gelblum has an Equal Weight rating on RIMM and a $71 price target.
Mike Abramsky of RBC Capital Markets, who has a $90 price target on RIMM, said that the new partnership between Nokia and Microsoft may "inadvertently help" its competitors. Apple, Android and RIMM could present "possible disruptions to Nokia and Microsoft while making it work." Also, "possible carrier and Enterprise caution on adopting Nokia/Microsoft pending roadmap/product visibility" could affect early sales of Nokia's forthcoming Windows Phone 7 handsets.
Canadian analyst Gus Papageorgiou of Scotia Capital, who has consistently held the highest stock target on RIM, did not change his price target of C$130 ($132). He said he believes the release of RIMM’s new devices will make the BlackBerry maker "more competitive against media-centric rivals while maintaining RIMM’s advantages in messaging and corporate security."
However, while many analysts see the near-term benefits for RIMM, others said the Nokia-Microsoft deal could prove to be a threat to RIMM in the long-term.
IDC’s Al Hilwa said with Nokia’s move to support Windows Phone, along with its competitively priced handsets, the Finnish firm could turn the tide against RIMM in emerging markets as its partnership with Microsoft matures. "As this partnerhsip yields actual product, that will be a problem in the long-run competitively for RIMM," Hilwa said.
On the non-BlackBerry front, analysts were mostly optimistic after reports said Research In Motion plans to run Google apps on its soon-to-be released PlayBook tablet.
"This is very exciting," said Tero Kuittinen, an analyst with MKM Partners who has a Buy rating on RIMM and doesn’t own the shares. "This gives an extra boost to the PlayBook."
UBS analyst Maynard Um, who has a Neutral rating and $61 price target said: "If RIM legitimately brings Android apps to its PlayBook, this will likely be viewed positively (instant app ecosystem for consumers)." However, Um said it could undermine the growth of RIM’s developer community (more reason to develop for Android vs. PlayBook), help grow its competitor’s ecosystem and essentially make RIMM another Android play without the benefit of lower R&D as RIMM supports it own OSes.
But some analysts remain negative on RIMM. Simona Jankowski at Goldman Sachs reiterated her Sell rating, while raising her price target to $60.