RIM: Is the growth gone?

Research in Motion may find its user base boiled down to hardcore loyalist customers and out of the mainstream smartphone market.

That's the biggest takeaway from Wunderlich Securities analyst Matthew Robison. He downgraded shares of RIM to a hold from a buy and cut his price target from $76 to $46. Given RIM shares are now below the $43 mark, Robison's downgrade would have much better $30 ago, but he makes some interesting points.

Among the key items:

• RIM's subscriber gains over the past two years will churn again, leaving the company with a business user base. Earnings will decline after 2013.
• PlayBook retail sales are mixed. "We believe the PlayBook continues to sell well relative to tablets other than the iPad, with minimal returns. However, shipment rates have waned since initial volume from those that had been waiting for it," said Robison. "There is little indication that the PlayBook has registered with consumers outside the loyal BlackBerry installed base."
• RIM's next generation BlackBerry 7 products will stabilize the user base, which will upgrade. But the products won't woo iPhone and Android loyalists. BlackBerry will be a traditionalist brand.
• QNX and other efforts to play catch up are a case of too little too late.
• BlackBerry Enterprise Server (BES) will lose its mojo. BES has nice security features, but it's unclear everyone needs them. Robison adds:

Nearly two-thirds of subscribers may be satisfied by IT features that can be delivered without the BES control that is the core element of the BlackBerry franchise. It also means that for a similar portion of subscribers, the large volume of BES applications that have been developed by corporate customers and system integrators— typically quoted to be of six-figure magnitude; comparable to applications in the Apple App Store (iOS) or Android Marketplace—are not relevant. Therefore, for the two-thirds of the RIM service subscribers that may not have critical security needs, RIM must go to market with product features and an applications ecosystem that, in terms of innovation rate, have been disadvantaged by the extra effort required to support the security and control mandate of the core BES user base.

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