TORONTO (Reuters) ? Research In Motion's dismal results and failure to offer a clear strategy to arrest its sad decline pushed its shares down more than 20 percent on Friday, drawing parallels with other technology stars that have fallen from grace.
The BlackBerry maker's shares plummeted below $29, hitting the lowest level in almost five years, the morning after it missed some of its own limp forecasts and reported a drop in quarterly profit. The shares are down more than 60 percent since February.
And even more worrying, some of the company's largest shareholders are showing signs of bailing out.
One of RIM's biggest investors, Jarisloswky Fraser, has already cut its stake in half, according to Bloomberg.
Another investor is giving RIM six months to get its business in order.
"I think in the next six months we'll have a much better idea of where we stand," said the head of a fund with a major stake. "They've laid out a business strategy and we're measuring their ability to execute."
LOWER TARGETS
At least nine analysts lowered their price targets on the stock, most of them highlighting what appears to be a once-dynamic product development pipeline that's running dry.
RIM admitted delays in revamping an aging smartphone lineup and slashed what most analysts viewed as an unattainable full year earnings outlook. It also said it planned to cut an unspecified number of jobs.
"Bottom line, we believe RIM has no short-term fixes to improve product portfolio, brand perception, to reinvigorate share gains, revenue growth and profitability," Citi's Jim Suva wrote in a note to clients.
RIM's difficulties bear a striking resemblance to recent troubles at Finland's Nokia, another struggling national technology champion blindsided by the roaring success of Apple's iPhone and handset makers using Google's Android software.
Some analysts drew comparisons between RIM and Nortel Networks, the once-mighty Canadian equipment maker that went into bankruptcy and is selling its final assets.
RIM's co-chief executives both sounded contrite on a conference call with analysts. But analysts said neither appeared to fully comprehend the challenges that lay ahead.
"The company is facing its greatest challenge, maybe in its history, and each CEO continues to believe there is unprecedented interest in their products," Deutsche Bank's Brian Modoff wrote as he slashed his price target to $20 from $45.
In the latest blow to its reputation, RIM has now has delayed the launch of the touchscreen version of the Bold model and at least one other device. That threatens its hard-won relationships with North American and European carriers, which expected the phones in July.
"We are concerned that RIM may have given them overly optimistic launch timetables, which may end up alienating" them, said Tero Kuittinen, an analyst from MKM Partners.
Cellular-enabled versions of RIM's PlayBook tablet, which would give carriers a reason to push the iPad competitor, aren't expected until autumn.
LEADERSHIP QUESTIONS
The dim results and outlook announced on Thursday also fanned questions about RIM's co-chief executives.
Deutsche's Modoff was disappointed that neither Mike Lazaridis nor Jim Balsillie described the planned job cuts as a reorganization -- which he would view as a positive.
Both brushed off criticism of RIM's dual chief with what seemed "more of a staged piece of theater than a serious answer to a serious strategic question," Modoff said.
RIM has cut staff before, in a 2002 move still known around its Waterloo, Ontario, headquarters as the "10 percent purge." That followed a dip in revenue and spiraling costs as the company started selling its early BlackBerry phones via carriers.
But it has been all growth since then, with RIM now boasting more than 17,000 employees.
To be sure, there were bright spots in first quarter results. International revenue grew 67 percent partly on the attractiveness of its BlackBerry Messenger instant messaging service. But that appeal may not be enough.
"The concern is the sustainability of that low-end market that is working for them now. I'm not sure over the long haul if that texting arbitrage is going to keep them afloat," said Matthew Robison from Wunderlich Securities, who suggested RIM may retract into a niche space serving corporations.
RIM's U.S.-listed shares were down $7.91 at $27.42 by late morning on Friday. The shares fell $6.53 to C$27.80 on the Toronto Stock Exchange.
The table below lists the price target changes on RIM's US-listed shares:
BROKERAGE PRICE TARGET RATING
New Old (In US$)
BMO 55 80 Outperform
Citigroup 25 45 Sell
CIBC 65 75 Sector outperformer
Jefferies 24 35 Underperform
National Bank 25 40 Underperform
Susquehanna 28 31 Negative
ThinkEquity 32 42 Hold
UBS 41 45 Neutral
(Additional reporting by Soham Chatterjee and Tenzin Pema in Bangalore; Editing by Don Sebastian)
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