RIM under threat, says Bernstein survey

BANGALORE, INDIA: Research In Motion is under significant threat as its corporate customers may soon abandon the BlackBerry in droves in favour of the iPhone and Andriod-based smartphones, according to a brokerage's survey, and the company's shares fell to a 17-month low.

RIM's shares dropped 5 per cent to C$46.16 on the Toronto Stock Exchange Tuesday afternoon after Sanford C. Bernstein raised fears of a decline in earnings due to market share and customer losses. They earlier touched a low of C$45.85.

The company's shares have lost more than 18 per cent of their value this month as growth in its marquee secure email services came under pressure from rivals as well as the threat of a ban in certain countries due to security concerns.

Concerned about militants using the BlackBerry or Internet to plan attacks, India has been pushing RIM to set up local servers to allow full monitoring of its services.

Bernstein — which in July surveyed 200 companies in the UK and the United States on their mobile email products, supported handsets and plans for the future — said 74 per cent of companies with mobile email have already adopted alternative platforms.

"Almost all these companies 'opened-up' their systems in the last two years, half of them in the last 12 months," analyst Pierre Ferragu wrote in a note to clients.

"We expect these companies to progressively ramp up the installed base of non-Blackberry solutions and therefore expect increased pressure on RIM's performance."

About one third of the companies that exclusively use the BlackBerry said they are "likely" to allow the use of other smartphones in the future, according to the survey.

The company's new subscriber additions — a metric RIM stopped revealing at the end of last year — are likely to continue to deteriorate as more customers start looking at alternate options, Ferragu said.

Research in Motion's latest BlackBerry Torch touchscreen phone has met with a muted reception and the company has been under constant pressure from Apple Inc and Nokia.

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Stiff competition in SME market

The market for corporate mobile email is highly penetrated and saturated outside of small and medium enterprises (SMEs), and RIM is likely to suffer the most competition in the SME market, the analyst said.

While BlackBerry's traditional corporate selling points such as security and reliability are valued by larger accounts, these features appeal less to SMEs who are likely to keep an eye on costs, Ferragu added.

RIM's phones have a higher average selling price (ASP) than its rivals and as companies expand their user base, they will prefer lower-priced handsets and there is little RIM can do about it, he said.

"We now expect negative growth in corporate and an accelerated margin and ASP decline," he said.

Ferragu, who cut his price target on RIM's Toronto-listed shares to C$42.52 from C$58.46, said he does not believe the corporate segment provides a valuation floor for the BlackBerry maker anymore.

Shares of Research In Motion were down 5 per cent at $43.34 on Nasdaq. They touched a 16-month low of $43.09 earlier in the session.