BBRY

Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) (or Blackberry) recently rolled out the Z10. Analysts at Deutsche Bank conducted channel checks which indicated a lukewarm reception. A Canadian based research firm, Canaccord Genuity is out with a more bearish research note. Their global surveys post the recent BlackBerry Z10 launch “indicated mixed initial sales with limited initial supply cited as the reason for early post-launch stock-outs at some carrier stores rather than overwhelming demand. The firm’s follow-up checks have indicated steady but modest sales levels.” Canaccord Genuity notes that with new BB10 smartphones launching in the U.S. only in mid-March or later at subsidized prices no better than competing high-end Apple/Samsung smartphones, combined with their expectations for the Galaxy S IV to launch at a similar time frame in the US market, they are lowering  BB10 sales estimates for the February quarter and all of F2014. They reiterate their sell rating and $9 price target.

Investment highlights

Given Canaccord Genuity’s store surveys indicated modest Z10 sales into the channel in the U.K. and Canada, the firm has reduced their February quarter BB10 smartphone shipment estimates from 1.75M units to 300K units.

Further, they believe that carrier support for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s BlackBerry 10 in the U.S. is modest, as demonstrated by Sprint only planning to launch the Q10 and T-Mobile only the Z10. Further, they anticipate carriers will not build large inventory levels for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s B10, consistent with prior BB7 high-end launches, and will initially stock modest levels given the weaker consumer demand for high-end BlackBerry smartphones.

With their expectations that BB10 smartphones will face increasing competition from a host of new Android and Windows smartphones and potentially a new iPhone in 1H/C2013, Canccord anticipates global carrier partners will order cautious initial BB10 inventory levels, leading them to lower their Feb. quarter and F2014 BB10 estimates. The firm has reduced their F2013/14 EPS estimate from ($1.10)/($0.48) to ($1.18)/($0.62) and they introduced a F2015 estimate of ($1.03).

Since BlackBerry has disclosed hiring two investment banks to explore strategic options combined with their belief that Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) will struggle to generate earnings, Canccord believes that a sum of- parts analysis is the best way to value the shares. Given their belief BB10 smartphones will struggle to gain sustainable traction in the highly competitive smartphone market especially with a launch date for the Qwerty Q10 only in April and the Z10 shipping only in mid-March in the U.S., the analysts believe that Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) may eventually sell assets, sell the entire company, or materially change its business model to a smaller niche supplier. Further, they believe Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) will struggle to generate positive earnings with its current business model and investors will mainly focus on a sum of the parts analysis.

The sum of the parts analysis values BlackBerry at roughly $4.71B or the sum of $1.6B for the enterprise sub base and NOC architecture and $3.11B for BlackBerry’s patents. This sum of the parts analysis results in the firm’s $9 price target.