Neutral on Research In Motion

We are upgrading our recommendation on Research In Motion Ltd. (RIMM) to Neutral based on its current valuation, which plummeted over 56% in the last year. In the meantime, the nightmare of Research In Motion continues and so far the company has failed to provide any specific time frame when its free fall will come to an end. Ever since Apple Inc’s (AAPL) iPhone hit the market, Research In Motion started losing its leadership position. The company is yet to launch any device that can capture market share from iPhone or Google Inc. (GOOG) developed Android-based smartphones.

Research In Motion provided a disappointing financial guidance. It seems management is doing research in slow motion as the company failed to understand how the tastes and preferences of the consumer’s are changing. We do not find any near-term catalyst. However, its low-level of current valuation may provide a cushion for further downslide of the stock price.

Research In Motion recently announced its plan to upgrade its service offerings by adding another value-added service to its portfolio. The new service, namely BlackBerry Messenger Music, will enable BlackBerry users to share songs and music with other users. Furthermore, Research In Motion may launch new BlackBerry devices that will support Android applications. Such a move will enable the company to boost its sale volume as well as regain its lost market share.

Several industry analysts predicted that Research In Motion may launch its first 4G BlackBerry smarthone in the first quarter of 2012. At present, the company is developing super-fast Long Term Evolution (LTE) network based BlackBerry, which will run on QNX operating system. We believei t is very much necessary for Research In Motion to launch high-end BlackBerry as early as possible to capture the initial momentum of the market. LTE is an emerging technology throughout the world including the U.S. An early launch of innovative LTE-capable smartphone may facilitate the company to regain some of its lost glories in the market.

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