Research In Motion‘s (RIMM) BlackBerry World conference begantoday in Orlando, including the introduction of a prototype of the BlackBerry 10, widely expected later this year, and plenty of giveaways to developers in hopes that buzz and software will follow.
However, analysts remained skeptical of the stock’s prospectsleading upto the conference, and today aren’t changing their tune much, although there were some saw glimmers of hope. Here are some summaries:
RBC Capital Markets analyst Mark Sue reiterated his Market Perform rating, as he sees RIMM delivering results below the Street’s expectations in the near term.
Prototype BlackBerry 10 Device Unveiled. RIM unveiled its prototype BlackBerry 10 (BB10) device at its annual user conference in Orlando today. The prototype device (with 4.2″ 1280×768 touchscreen, no QWERTY keyboard) resembles a smaller version of the PlayBook and appears similar to many of the Android touchscreen slabs out there. CEO Thorsten Heins appeared confident that RIM is meeting milestones to launch the device in the 2H/CY12. We believe carriers may be targeting an October launch.
BB10 Targets Core Users. RIM received applause from the friendly audience for new BlackBerry 10 features that address its core productivity/message-centric customer base. The BlackBerry 10 UI (based on QNX cascades) appears similar to Microsoft Metro with quick to view notifications (which looked to us like Metro’s Live Tiles) and seamless multi-tasking (e.g. view a PDF attachment, email, and list of messages all at the same time). RIM’s new on-screen keyboard appears innovative offering predictive next word suggestions (as opposed to just word completion), and may offer the productivity that BlackBerry users are looking for in a touchscreen. RIM also appears that it will have BBM available for BB10 smartphones (addressing a prior concern).
Everyone Wants Apps. Several developers including Gameloft, Citrix, and others showed off some competitive apps on BB10. Many indicated BB10 is easy to develop for, a big improvement from legacy BlackBerry. While RIM is addressing prior shortcomings that limited developer momentum, it is still playing catch-up vs. Apple’s 600k apps and Android’s 400k. We believe beyond core BlackBerry fans, RIM’s smaller app/content ecosystem could constrain BlackBerry’s traction among the broader consumer market.
JMP analyst Alex Gauna reiterated a Market Underperform rating and $12 price target on the firm following the BB10�s debut.
There were no real surprises unveiled as what appears to be a reasonably well-attended 2012 Developer Conference got underway. The absence of new devices and only a beta version of its new tool kit for HTML 5 and native software development means earnings power should continue to deteriorate and leave any favorable sentiment hinging on takeout speculation until the new phone arrives in the fall. We are reducing our FY13 and FY14 estimates to reflect the recently reported Apple (MP) and Samsung smartphone upside that we assume is taking a heavy toll on RIM market share and reiterating our $12 price target based on an approximate 1x tangible book.
Pacific Crest Securities analyst James Faucette also saw the events at the first day of the conference as underwhelming.
Modest negative for RIMM. We view today�s sneak peek of BB10 as modestly disappointing, particularly as the company spent more than half of its time on the new BB10 OS featuring the new touchscreen keyboard, which to our view seemed like a Tuner version of every other touch-screen keyboard already on the market. The other features that were previewed of full multitasking and photo editing capabilities were somewhat interesting, but we have questions as to their real world feasibility given potential drain on battery life.
Renewed focus on enterprise evident. The company�s renewed focus on enterprise was evident, with most of the partners that were trotted up being companies talking about their existing use of BB in the enterprise combined with superficial comments on how their respective applications will support BB10.
Further behind than PALM was in 2009. Based on the little that RIMM showed during its keynote at BB World 2012, we believe that RIMM may be further behind iOS and Android in terms of product development to help catalyze ecosystem development than what Palm was when it launched webOS at CES 2009 (for which it won the Best of CES award). We all know the sad outcome of that journey (although we would admit that RIMM has substantially more resources at its disposal than Palm ever did�user base, cash, cash flow, etc).
Think Equity analyst Mark McKechnie raised his target price by $1 to $13, but reiterated his Hold rating has he sees RIMM with a “valley” to look through between the present and the release of the BB10, at which point it will still face fierce competition from Apple (AAPL). His price target reflect his belief that RIMM can “monetize its patents or save its services revenues.”
BlackBerry 10 (“BBX”) developer units handed out. At today’s keynote,RIMM focused the majority of its time on its upcoming BBX platform scheduledfor a “late CY12″ introduction but recent blogs have been speculating October.In conjunction, RIMM is handing out development platforms which to us looklike “shrunken down” PlayBooks – all touch – but running the new BBX software.
BBX looks a lot like a Windows Phone 7 to us. RIMM referred to itsnew “windowed” or “tiled” GUI as “cascades”, which look very similar to theWindows Phone 7 environment. Demos included low-latency performance,linked notifications, and easy navigation between multiple windows in an application.
Adding secure third-party support to its MDM offering. This was the bignews to us as it represents the first real strategic shift we’ve seen by RIMMsince the addition of new CEO Thorsten Hines. Simply put, RIMM plans to openup all the features of its BlackBerry Platform, including secure connections toe-mail and contacts, to its BlackBerry Fusion offering in the next 12 months. Weview this as a step in the right direction to hopefully offset continuing declinesin RIMM’s US subscriber base.
We do believe RIMM will face execution challenges as key employees JimBalsillie (former CEO) and David Jach (the original architect of RIMM’s BESserver/NOC) left the company earlier in the year. We also note RIMM facescompetition in the Mobile Device Management (“MDM”) space from numerousprivate companies as well as SAP/SY.
Related: See commentaryfrom UBS, released this morning.
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