Strong iPhone Launch Leads Needham Analyst to Cut RIM Rating
Published on: 16th July 2008
SAN FRANCISCO (Dow Jones) -- The rollout of Apple's. 3G iPhone was seen as a direct shot at the dominance of Research In Motion's BlackBerry in the smartphone market. And at least one analyst sees the company already feeling the iPhone heat.
Needham & Co. analyst Charlie Wolf on Wednesday cut his rating on RIM's stock to underperform -- the equivalent of sell -- from his previous rating of hold, saying the company's strength in the consumer market "is bound to come under siege because of the iPhone."
Wolf also lowered his 2008 earnings estimate for RIM to $3.70 a share from $4.05, and cut his 2009 outlook to a profit of $4.80 a share from $6.25.
RIM's shares fell $1.85, or almost 2%, to $104.04, while Apple rose 46 cents a share to $170.10 in Wednesday trading.
Wolf said that until Apple came out with its new iPhone, much of RIM's BlackBerry success was due to a lack of compelling rival offerings in the consumer market. Wolf pointed to the BlackBerry's growth rates over the last two years as how easily RIM claimed the smartphone sector for itself. During the first half of RIM's 2007 fiscal year, new BlackBerry subscribers rose just 14%, but by the end of RIM's 2008 fiscal year, the company's new subscribers had climbed by 114% from the year prior.
Most of that gain came from the consumer market. The introduction of the BlackBerry Pearl smartphone claimed even more converts and helped RIM turn back efforts from the likes of Motorola and Samsung. However, Wolf said the introduction of the 3G iPhone means that "the days of no competition are over."
Wolf said RIM is likely to remain dominant in the enterprise market, but the iPhone is bound to cut into the BlackBerry's "incredible growth in the consumer smartphone market." The main reasons Wolf cited are that Apple increased the iPhone's addressable market with plans to sell the iPhone in 70 countries by the end of the year, and the company released a software development kit for third-party developers to build applications for the iPhone.
Additionally, Wolf expects the new version of the iPhone to appeal to one of Apple's key groups of consumers.
"The phone promises to be a must-have product for teenagers already addicted to their iPods," Wolf said, in a research note.
Wolf said RIM is attempting to fight back against the iPhone. The company launched its BlackBerry Bold model in the spring and is said to be releasing a new BlackBerry Thunder model in late summer. But Wolf said those efforts might be a little too late for RIM, as the software behind the iPhone's operating system "makes the device one of a kind."
"Research In Motion has no hope of catching up on the software front, which promises to be the next battleground in the smartphone market," Wolf said.
(END) Dow Jones Newswires