RIM Can Lift Market Share, Stock Value with Enhanced Product Portfolio

Research in Motion (NASDAQ:RIMM) primarily competes with players like Apple (NASDAQ:AAPL), Motorola (NYSE:MOT), Nokia (NYSE:NOK) and Google (NASDAQ:GOOG) in the rapidly expanding smartphone market.

Our price estimate for Research in Motion stands at $68.92, implying an 18% premium to market price. The company’s stock has underperformed the broad based market year-to-date partially due to slow market share growth in the mobile phone market.

RIM has made conscious efforts in the recent past to improve its product portfolio, having made a few key acquisitions of companies including Cellmania, QNX and Astonishing Tribe to improve BlackBerry’s software design and performance. ^{[1] [2] [3]} The company is also planning to introduce its new PlayBook tablet in the first half of 2011. ^[4]

Will these efforts be enough to lift Research in Motion’s stock?

RIM Jockeying for Position in the Mobile Phone Market

RIM’s BlackBerry has traditionally lagged behind the user interface capabilities of Apple’s iPhone. With the above mentioned acquisitions, RIM hopes to improve its design and performance to become more competitive in the mobile phone market, which has become increasingly competitive with Apple setting its sights on higher market share, and players like Nokia, Motorola, and Samsung cutting hardware prices to increase their presence.

RIM’s market share has been relatively flat over the past year, increasing from 2.8% in 2009 to an estimate 3.2% in 2010. We anticipate improved market share gains in the years ahead, with RIM reaching a 6.7% share of the global mobile phone market by the end of our forecast period.

Significant Upside to Stock Value from Market Share Gains

RIM introduced the BlackBerry 6 operating system a few months back in an effort to improve its smartphone features, but these features were not compelling enough and RIM was simply playing catch-up with the competition (See “RIM Plays Catch-Up With New BlackBerry OS”).

RIM also recently unveiled its new Playbook tablet (scheduled to launch in the first half of 2011), which we initially expected to pose little threat to Apple’s iPad, potentially even creating downside to RIM’s stock value due to incremental R&D and SG&A expenses associated with the product. ^[1] (See “A RIM Tablet Risks Additional Downside to its Stock”). However, RIM can leverage the QNX’s operating system to increase the product’s functionality and, ultimately, its profitability. RIM management has commented that the PlayBook will be three times faster (and cost less) than Apple’s iPad, two key metrics that could help RIM put up a fight in the tablet market. ^[5]

RIM also plans to bring QNX OS capabilities to BlackBerry smartphones in the future. If these efforts materialize, RIM could accelerate its market share gains, prompting upside to our price estimate. To demonstrate the sensitivity of RIM’s stock value to this metric, we estimate potential upside beyond 12% to our $68.92 price estimate for RIM’s stock (which is already 18% ahead of market price) if its mobile phone market share increases 1 percentage point beyond our current projections (to 7.7%) by the end of our forecast period.

Drag the trend-line in the chart below to see the impact of various mobile phone market share scenarios on RIM’s stock value.

[trefis_forecast ticker=”RIMM” driver=”0315″]

You can see the complete $68.92 Trefis Price estimate for RIM stock here.

1. CNet: RIM Buys Cellmania, App Store Software Maker [↩] [↩]
2. Businessweek: Research in Motion to Buy QNX Software [↩]
3. The Wall Street Journal: Research in Motion Buys the Astonishing Tribe; No Terms [↩]
4. Reuters: RIM Unveils Playbook Tablet to Compete with iPad [↩]
5. See Business Week article, November 2010 [↩]