Research In Motion Ltd. (RIMM) plans to upgrade its service offerings by introducing another value-added service to its portfolio.
The new service will enable the company’s business clients to perform back-office management of email traffic and other BlackBerry services while abroad. This improved service will allow its consumers to save money and time. Additionally, it will provide a solution to the security concern as smartphone usage ramps up among employees.
Research In Motion, the manufacturer of the Blackberry smartphones, plans to launch its first tablet/netbook called “BlackBerry PlayBook” in the first quarter of 2011. This new device will run on user-friendly operating system called QNX software, which the company had acquired in early 2010. PlayBook netbook will not only help the company to diversify its offerings but also protect the company from serious competitive threats posed by Google Inc’s (GOOG) Android-based smartphones and Apple Inc’s (AAPL) iPhones.
The company reported an excellent third quarter fiscal 2011 financial results with revenue increasing 40% year over year while earnings per share (EPS) increased 58.2% year over year. The company added around 5.1 million net new BlackBerry subscribers during the same quarter.
At the end of the third quarter of 2011, more than 50% of the company’s total BlackBerry subscriber base was from the non-enterprise segment, which signifies that it is also getting popular among non-business class people. This diversification has reduced the company’s dependence on the corporate customer segment.
Booming foreign markets and strong fundamentals coupled with Research In Motion’s new PlayBook and QNX-based smartphone line up will act as positive catalysts for growth. Despite these positive factors, we remain concerned regarding the company’s net subscriber addition, which is directly related to its Service segment revenue and precipitous decline in Average Selling Price (ASP), reflecting a product mix in favor of low-end BlackBerry.
We, thus, maintain our long-term Neutral recommendation for Research In Motion. Currently, Research In Motion has a Zacks#3 Rank, implying a short-term Hold rating on the stock.
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