Investors Banking on a RIMM Shake-Up Might be Disappointed

October 11th, 2011 by Trefis Team
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Trefis
RIMM: Research In Motion logo
RIMM
Research In Motion
RIM Headquarters

Source: Wikipedia

Last Tuesday, Research in Motion’s (NASDAQ:RIMM) stock gained 12.5% in a single day, the most in the last 2.5 years, on speculation that the company may be a takeover target (see RIM Jumps Again on Takeover Speculation). The stock has held onto to these gains and is about 15% higher in the last 5 days on reports that support is growing for a management shake-up. However we are concerned that hopes of a turnaround could be too optimistic as management might be difficult to remove and RIM’s position in the smartphone market continues to slide.

Firstly, we believe that RIM might make a poor acquisition target considering the management’s unwillingness to consider a sale in the past, a lack of a strategic fit for potential buyers and a comparatively weaker patent portfolio, something we discussed in our earlier note titled Why RIM Makes a Poor Acquisition Target. Hence, since the stock’s uptrend last week was mainly due to the takeover speculation, the stock could lose all gains if investors realize that the chances of RIM getting acquired are quite low.

Secondly, Apple’s (NASDAQ:AAPL) newly launched iPhone, iPhone 4S, is flying off the shelf. According to a recent report, iPhone 4S pre-orders topped 1 million in the first 24 hours. [1]

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This means that RIM’s chances of making a comeback looks slimmer as the smartphone market gets even more competitive. Although RIM could get a sigh of relief that Google (NASDAQ:GOOG) recently postponed the launch of its next major iteration of Android, Ice Cream Sandwich, the threat from Apple nonetheless remains large. [2]

Our $26 price estimate for RIM stock is about 10% above market price.

See our complete analysis for RIM stock here

[trefis_slideshow ticker=”RIMM” rhs=”3″]

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Notes:
  1. iPhone 4S Pre-Orders Top One Million in First 24 Hours, Apple press release, October 10th, 2011 [↩]
  2. Samsung And Google Postpone Huge Android Announcement Out Of Respect For Steve Jobs, BusinessInsider, October 7th, 2011 [↩]