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WRAP UP - RIM IN THE NEWS TODAY: Jefferies Downgrade, Credit Suisse Result Preview, Settles Dispute With Dolby

Research in Motion (RIM.TO) looks set to close up more than 1% after a roller coaster day that saw it touch a day high of $30.20 and a day low of $29.01 with close to 2 million shares traded.

RIM today agreed to pay patent royalties to Dolby Laboratories Inc. to end a legal battle over technology to improve audio quality, according to a Bloomberg file. RIM will pay "standard terms," San Francisco-based Dolby reportedly said in a statement today, settling patent-infringement lawsuits filed in June in the U.S. and Germany. While financial terms weren't disclosed, Dolby told analysts on a conference call last month it was counting on US$15 million in back royalties from RIM in the fiscal fourth quarter, as well as interest income, Bloomberg reported.

After flying high last month, shares of RIM may be hitting the skids, said a feature on Barron's online. It noted Jefferies downgraded RIM to Underperform from Hold. The move comes a mere three weeks after the firm upgraded RIM to Hold. "We would follow Jefferies' lead and take some profits on RIM. Fueled by takeover theories in the wake of Google's ( GOOG ) purchase of Motorola Mobility Holdings ( MMI ), RIM shares have surged 35% over the past month, compared to a 2% gain for the Nasdaq, the article says.

Elsewhere, International Strategy & Investment Group was out with a research report on RIM and it has a Hold rating and a US$40 price target on shares.

And Credit Suisse previewed its results on September 15, maintaining a Neutral rating. "We maintain our FY12/13 EPS estimates of $4.80/$4.85 and TP of $30 ahead of results on Sep 15th. We continue to believe that the slow pace of innovation at RIM will result in continued share loss near term. This, together with margin risks - both from increased competition near term, as well as from high margin services revenue being vulnerable longer term - results in our FY12/13 EPS being 5%/8% below consensus."

F2Q - expect in-line results. "For the quarter, we expect revenue/EPS of $4.38bn (-11% qoq/-5% yoy) and $0.91 (including $0.03 from buybacks) versus the mid-point of guidance/consensus of $4.50bn/$0.90 (ex-buybacks) and $4.46bn/$0.87 respectively. Our estimates are based on 11.8mn smartphones (-11% qoq/-2% yoy) and ASPs of $258 (down 5% qoq) versus consensus expectations for 11.8mn and $251. Further, our forecast assumes HW GMs will decline to ~25% (-700 bps q/q) resulting in group GMs of 40.1% vs. consensus at 39.3% and guidance of ~39%.

F3Q outlook - "some upside risk driven by sell-in of new devices. Driven by sell-in of the 8 new recently launched Bold/Curve/Torch devices, we believe there could be some upside to our F3Q smartphone unit forecasts of 13.8mn (+17% qoq, -3% yoy) vs. consensus at 14.0mn. With a recovery in ASPs (we assume $265, up 3% qoq) and GMs (we assume 27.3%, + 210 bps q/q), we forecast F3Q group revenue/EPS of $4.97bn (+13% qoq/-10% yoy)/$1.26 versus consensus of $5.27bn/$1.37. Despite upside risks to our near-term estimates, we continue to see new products as only evolutionary, and hence question ultimate sell-through and the sustainability of the impact that these products will have on earnings."

Valuation. "RIMM shares trade on a P/E of 6.1x our FY13 EPS. While valuation remains undemanding, we don't expect investor concerns around earnings declining long term to recede until there is evidence of a more competitive smartphone platform in the form of QNX. This is unlikely until early 2012."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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