If BB10 Fails, Don't Bet on BB11

Canaccord Genuity analyst T. Michael Walkley crashed Research In Motion's (NASDAQ: BBRY  ) party yesterday.

Injecting a sobering counter to the recent days of euphoric rallying, Walkley feels that the stock's torrid run -- up a meaty 86% since bottoming out three months ago -- is overdone.

There's a lot of buzz building for the smartphone pioneer's BB10 mobile operating system update, but his firm isn't convinced.

"We do not believe BB10 will return RIM to sustained profitability," he writes.

Those may be fighting words to RIM bulls that have benefited from their contrarian optimism in recent weeks, but it's not as if even the bulls are entirely sold that the company can bounce back with the refreshed platform that will be introduced on Jan. 30.

Goldman Sachs analyst Simona Jankowski -- one of last week's more vocal bulls in pushing her firm's price target from $9 to $16 -- sees only a 30% chance in BB10 being a success. Her price target is merely the weighted valuation based on the new operating system's fate. If it's a hit, the stock should trade sharply higher.

Walkley disagrees, downgrading the stock from hold to sell. His channel checks of the competitive landscape find folks continuing to dump BlackBerry devices in favor of Apple's (NASDAQ: AAPL  ) iPhones or smartphones running on Google's (NASDAQ: GOOGL  ) industry-leading Android.

"Our checks do not indicate the consumer pull, carrier push or developer excitement necessary for BlackBerry 10 to reverse the challenging trends faced by RIM," he argues.

That's a perfect storm right there. Developers will always be a hard sell. They're going to make sure that their applications run on the devices that are popular, and for now that's making iOS and Android versions of the programs. RIM will have to follow Microsoft's (NASDAQ: MSFT  ) path by financially incentivizing prolific developers, but that's no guarantee of success.

Consumers may be easier to get. RIM closed out its latest quarter with roughly 80 million subscribers. BB10's been winning enough raves to sway many of those to stick with RIM. However, it's hard for a platform to be a hit if it lacks carrier and developer support. And, it probably goes without saying, but there's a reason why nobody is clamoring for a webOS smartphone these days. If RIM flops with this update, it's pretty much over for BlackBerry. 

We'll see soon enough. RIM reports later this month, and then we'll get to the fireworks by the end of next month.

A little balance as we head into both of these important milestones isn't a bad thing.

RIM shot
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Read/Post Comments (8) | Recommend This Article (2)

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  • Report this Comment On December 04, 2012, at 5:51 PM, dwilh51183 wrote:

    Why are all the analysts checks indicating AAPL products are gaining momentum and growth is gaining steam, yet all of America who watches tv believe GUY ADAMI. He wants you to panic and sell it along with his buddies so they can buy your shares. AAPL WILL TRADE AT $825 A SHARE BEFORE IT HITS $500.00 A SHARE.

    Don't sell AAPL...BUY AAPL

    Who is the top stock picker in America? It's not Dennis Gartmann, it's not Tim Seymore, it's not Guy Adami. Lou Navellier is much better , beating the market 15 to 1 and he says AAPL is a strong buy AND IT WILL HIT 1000 A SHARE WITHIN 2 YEARS

  • Report this Comment On December 04, 2012, at 8:55 PM, Arthur1111 wrote:

    Mike Walkley downgraded RIMM and upgraded Apple. The result is:

    RIMM did not go down.

    Apple went down.

    There you go. Apparently, no one cared what Mike Walkley had to say, and neither did I.

  • Report this Comment On December 04, 2012, at 9:38 PM, Arthur1111 wrote:

    Back in the 80's, we used to make fun of Japanese cars. Those days American cars were the best. Little over 20 years after, American car makers were on life support, and Japanese cars are the best. If we need to learn anything, it is to show respect and work for the future, instead of bashing others for no reason.

    Apple can't rely on American fans to succeed. It needs to innovate to stay ahead to survive. Next year, Apple will learn this lesson the hard way when BB10 hits the market.

  • Report this Comment On December 04, 2012, at 11:08 PM, digitally404 wrote:

    +1 to Aruther1111's comment.

    Why anyone would listen to Walkley is beyond me.

  • Report this Comment On December 05, 2012, at 8:53 AM, magnaman1969 wrote:

    Great cut and paste skills.....do you have to go to school for that?

  • Report this Comment On December 05, 2012, at 9:16 AM, PaulDEJ wrote:

    2013 will be the year that RIM comes back. No amount of negative articles and comments can stop the momentum they currently have. Carriers want them to succeed and so do developers and consumers. The american era is over, and so will apple be next year. America is not the greatest and the best any more and nor is its products or brands. Next year China will have the biggest mobile market, India has the biggest movie industry etc. The answer to long term profitability isn't doing well in america any more is in doing well all over the world, and there RIM has a huge lead.

  • Report this Comment On December 05, 2012, at 9:38 AM, infektu wrote:

    wow...

    Walkley's "checks" do not indicate "the consumer pull, carrier push or developer excitement necessary for BlackBerry 10 to reverse the challenging trends faced by RIM."

    Based on what? BB7 sales!

    gimme a break...

    Also, a little note on this Walkley's record wouldn't hurt.

    Alternatively, you can paste here some advice from your local corner store clerk.

  • Report this Comment On December 05, 2012, at 12:56 PM, greenember wrote:

    No consumer pull for a phone that hasn't been announced or demoed publicly yet? And that the average consumer who doesn't read tech news has NO IDEA is coming yet? I would have NEVER guessed!

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