Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM) has received a boost following recent worries that the company may be edged out of business if the Blackberry 10, which is expected to be launched in late January or early February next year, fails. This new upgrade comes after a study and subsequent report by MKR Partners. Although MKR Partners joins a growing list of firms that have upgraded Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM), its outlook on Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM) differs greatly from the general outlook. Unlike the bulls, MKR is inclined to believe that the positive implications of the Blackberry 10 have been overstated. While the Blackberry 10 will certainly drive notable unit growth by filling the comparatively low BB7 inventories, MKR believes that RIMM’s channel partners will be cautious about holding too much inventory at the device’s initial stretch.RIMM new earnings model MKM
MKR argues that the expected indisposition among channel partners will be inspired by the fact that Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM) has shed off reasonable share in both developed and developing enterprise and consumer markets. In addition, MKR contends that Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM) will conduct a controlled launch in an attempt to avert heavy discounting and revenue reversals. MKR also believes that RIM may want to forge the impression of scarcity/success; which essentially translates to deliberate low sales to create the illusion that consumers are buying at a frenzied pace.
MKR Partners still maintains its $2.76 billion estimate on 3QFY13 results. The results, which are expected to be made public on December 20th 2012, will not factor in BB10. However, MKR’s 4QFY13 estimates have factored in the BB10. The 4QFY13 estimate particularly increases the forecast from 7.7 million unit sales at $232 a unit, to 8.3 million sales at $239 a unit. In addition, MKR believes that BB7 and its preceding models will record a 5 percent dip to 6.6 million units.
Increased estimates on FY14 will not restore profitability
MKR also notes that Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM) is likely to ship an estimated 33.6 million Blackberry 10 units in FY14, increasing the estimate from 30.3 million. MKR has gone a step further to increase its fair value from $9 to $11. Although the outlook on FY14 is encouragingly rosy, Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM) argues that profitability is still far from reach. Nevertheless, the inability to restore profitability has not swayed MKR’s overall neutral rating. The research firm still believes that RIMM will wage a sequence of heated struggles as it tries to regain relevance and dip above the break-even point in a market that is largely dominated by Apple’s iOS and Google’s Android. Despite the fact that MKR has rallied a somewhat bullish outlook on Research In Motion Limited (USA) (NASDAQ:RIMM) (TSE:RIM), it still argues that the Blackberry 10 is likely to fail, and has in fact, pegged an 85 percent probability of failure.