Research in Motion faces a tough year ahead as competition heightens for its products, warned analysts as they slashed price targets on the stock, after the company posted a loss and said BlackBerry shipments fell for the holiday quarter.
On Thursday, RIM recorded its first quarterly loss since the fourth quarter of fiscal 2005 and said it would no longer issue financial forecasts.
"The lack of outlook, unit growth deceleration and inventory build is a negative for RIM's technology supply chain, specifically Celestica Inc , Flextronics International Ltd and Jabil Circuit Inc ," Citigroup analysts said in a note dated March 29.
RIM makes up 20 percent of sales at Celestica, 15 percent at Jabil, and 10 percent at Flextronics, RBC and Citigroup said.
The Waterloo, Ontario-based company's BlackBerry shipments dropped 21 percent sequentially, the first decline in the quarter covering Christmas since 2006.
Most analysts consider the expected launch of next-generation BlackBerry smartphones later this year as a do-or-die battle for the company, but warn of greater competition.
Competition stings
RIM faces increasing competition across all its products -- from Apple Inc's iPhone 4S and the new iPad, smartphones using Microsoft's Windows software and cheaper smartphones powered by Google Inc's Android, said Canaccord Genuity analysts.
Analysts at Canaccord Genuity, Barclays Capital, Nomura, BMO, RBC and Credit Suisse slashed their price targets on the U.S.-listed shares of the company.
According to Thomson Reuters StarMine, nine analysts rate the stock "hold," two have a "hold," and two others rate it a "buy" or its equivalent rating.
In a "blossoming smartphone market," RIM's volumes over the next one year could actually drop 25 percent, as the existing BB7 devices are not competitive and as RIM's share in the international markets is rapidly eroding, Credit Suisse said.
Improvements in the lower end from Nokia could also hurt RIM's share in the international markets, Credit Suisse said, adding that only the potential for a sale of the company keeps their rating on the stock at a "neutral."
Too little, too late?
On Thursday, RIM's new Chief Executive Thorsten Heins announced the initial steps in a strategic overhaul and would not rule out an eventual sale of the company, but a majority of the analysts are skeptical of the company's turnaround efforts.
"Accelerating core business erosion and international pressures narrow RIM's turnaround window... While CEO Heins praises BB10...RIM continues to misread the market and may have lost too much momentum to recover," RBC Capital Markets said.
Analysts at Nomura, in a note titled "Too Little, Too Late," said RIM was unlikely to succeed as a standalone ecosystem, even if it did find some partners.
"Management still seems keen to succeed at both the high and low ends of the smartphone market, all while still building a standalone application ecosystem," Nomura analysts said.
Shares of RIM closed at C$13.69 on the Toronto Stock Exchange on Friday. RIM's U.S.-listed shares closed at $13.73.