Pacific Crest Securities says Research In Motion's new BlackBerry 10 operating system, the linchpin of its comeback plan, may be dead on arrival.
"We believe BB10 is likely to be DOA," James Faucette, a Pacific Crest analyst said in a report. He has the equivalent of a sell rating on the shares. "We expect the new OS to be met with a lukewarm response at best and ultimately likely to fail."
Research In Motion (RIM) is counting on BB10, a new operating system that lets users "peek" at one program with their finger while running another, to restore market share it has lost to Apple's iPhone and devices running Google's Android software. RIM shares had rallied last week after the company said mobile carriers had begun lab-testing BB10 phones worldwide, a sign the devices are on track for delivery early next year.
RIM shares fell 9.1 per cent to $US8.24 at the close in New York, the biggest decline since June 29 and the first loss in six trading days.
RIM shares had climbed 27 per cent until yesterday since September 27, the day it reported a narrower second-quarter loss than analysts estimated, with an increase in cash reserves and growth in its customer base. The Standard & Poor's 500 index has lost 1.3 per cent in the same span.
The quarterly report prompted analysts including Cormark Securities' Richard Tse and Scotia Capital's Gus Papageorgiou to raise their ratings on the stock. Paradigm Capital today resumed coverage of RIM with a buy rating and a price target of $US14.
"The company has significantly improved its ability to attract developers to build apps for the BB10 ecosystem, which we view as a key catalyst for success," Paradigm Capital's Gabriel Leung wrote in a note published today.
Pacific Crest's Faucette remains bearish. Phones with the software, due in the first quarter of 2013, will struggle to attract buyers because of an unfamiliar user interface, a lack of compatible technology and few software applications, he said. Any opportunity for a sale of all or part of the company may have passed, he said.
RIM hired JPMorgan Chase & Co. and RBC Capital Markets in May to help explore its strategic options. Chief executive Thorsten Heins told analysts in September that he's met with CEOs at various organisations over the past several months to discuss BB10 licensing and partnerships.