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In a note to clients, Bear Stearns analyst Andy Neff reduced his rating for Research In Motion (RIMM) from Peer Perform to Underperform. He notes that this is a result of slowing growth rate, and saturation of the wireless email market. Key excerpts:

• While NTP litigation was an obvious dampening factor for demand over the past few qtrs, we’re lowering our net sub add forecast (6th consecutive time), highlighting decelerating growth rates. While potential for wireless email may be very large, the issue is what price of service/handset is required to rejuvenate growth.

• RIMM is planning to address these issues with new products targeting consumer/prosumer, including MP3 player, camera and other functionality, but: 1) It's not clear that a corporate user-centric company can change its spots to target consumers (few can), and 2) This new approach could imply a lower-margin financial model.

• To RIMM's defense, they did see a pickup in the weekly sub adds, but it's not clear if that is sustainable. Competition doesn’t seem to be the problem (yet) -- Good Technology is ~1/10th of RIMM and MSFT/NOK are just emerging -- but carriers/competitors may use price to stimulate volume.

• RIMM’s 4Q06 pro forma EPS of $0.65 was below our est of $0.66 (Street at $0.67), on revs of $561mm, but in line w/ preannouncement. Net sub adds of 625K were below our 630K est but in line w/ revised outlook of 620-630K.

• We’re lowering FY07 post-options EPS from $3.04 to $2.65 and FY08 from $3.47 to $3.12 on higher tax. We are also reducing our 1Q07 EPS from $0.73 to $0.64.

Source: Bear Stearns Downgrades Research In Motion (RIMM)