updated 12:20 pm EDT, Fri June 17, 2011
RIM spring 2011 sees stock crash, downgrades
RIM's collapse in performance in spring has triggered one of the worst instances of investory backlash in the company's history. As of mid-day Friday, the company's stock had dropped about 22 percent, aided mostly by an after-hours selloff late Thursday but a lack of confidence on Friday morning. The company's sixth-largest investor group, Jarislowsky Fraser Ltd., said it had sold more than half its shares in the BlackBerry creator after accusing RIM executives of "resting on their laurels."
At least ten investor firms downgraded either their overall recommendation or share targets for RIM stock, including Canaccord Genuity, Caris & Co, Citigroup, Deutsche Bank, Evercore Partners, JPMorgan, MKM Partners, Needham, Scotia Capital, and Sterne Agee. Most were frustrated with the company's dismissive stance on management changes. Deutsche Bank's Brian Modoff saw the defense of having two CEOs as a "staged piece of theatre" and that the restructuring RIM's founders denied was happening was precisely what was needed to get the company back on track.
Needham's Charlie Wolf likened RIM to a "one-trick pony" that had suddenly discovered it needed more talents.
Canaccord's T. Michael Walkley called the debate about executives a "distraction" and that the real issue was that the focus on launching the BlackBerry PlayBook, especially given its unfinished software, had hurt RIM's core smartphone business. Android and iPhone were moving faster, and key delays in the Bold 9900 now meant it had to run up against a second wave of 2011 Android phones and the iPhone 5.
Citigroup's Jim Suva echoed the sentiments but pained a bleaker picture, suggesting that RIM might have reached a cliff from which there was no coming back. He noted that LG, Motorola, Nokia, Palm, and Sony Ericsson had all been convinced they were still successful, like RIM, but had a fundamental misunderstanding of the smartphone market and adjusted too late to avoid steep losses. Most of these had tied themselves to Windows Mobile on the assumption Microsoft always dominates markets and were punished for it, or else leaned too heavily on basic feature phones when the iPhone and later Android were making smartphones popular.
"We've seen this movie before," Suva wrote. "The history of wireless is littered with OEMs that had significant product/cycle share gains, but then missed structural market shifts."