Research In Motion Sickness May Be Chronic

As investors drive down Research In Motion's stock price, analysts are split on the company's near-term prospects.
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SAN FRANCISCO -- Shares of

Research In Motion


were reeling Tuesday -- a fate all too common in the past week, despite the fact that Wall Street analysts are especially split on the company's near-term prospects.

The BlackBerry device maker's stock was off $3.19, or 6.6%, to $45.32 in recent trading. It has now fallen about 25% since touching a Jan. 9 high of $60.47, which was set after a 41% run-up beginning in early December.

As investors were reminded Tuesday, market volatility isn't yet out of style, and the


itself has now lost about 11% in the past six weeks, after a 25% move higher from the 52-week intraday low set on Nov. 21.

For RIM, however, the recent fall from grace has had less to do with market dynamics and everything to do with its announcement last Wednesday that fiscal fourth-quarter net subscriber additions would be 20% higher than expected while gross margins and earnings per share

wouldn't meet prior projections


As my colleague Scott Moritz pointed out, a main thorn appears to be costs surrounding the company's BlackBerry Storm device, which launched Nov. 21 in a bid to siphon off some of the


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iPhone momentum. RIM sold 1 million Storms through the end of January.

Following RIM's news, investors wasted no time pushing the stock lower -- it fell 17% on Wednesday alone -- but analysts scrambled to determine where the company and its stock are headed this year.

Wall Street seemed particularly obsessed with RIM's statement that net subscription additions for the fiscal first quarter, ending in May, would be "more normalized."

At Barclays, for example, analysts said last week that glass-half-empty investors essentially just didn't get it: The firm believes "normality" suggests merely below-seasonal growth next quarter, rather than being down meaningfully, as implied by the stock reaction. Barclays sees a buying opportunity as it expects average selling prices to move higher as the material benefit from its 3G-device product offsets the foreign currency hit.

Similarly, analysts at AmTech said Tuesday that its takeaway from a recent meeting with management has the firm thinking that May-quarter net subscription additions will be "flat-to-down" from a "blowout" 3.5 million additions in the current quarter.

More important, AmTech sees the company's current quarter as marking the bottom of gross margins and expects the number to rise moderately throughout the year.

Contrast those views with that of Credit Suisse analyst Kulbinder Garcha, who downgraded the stock Friday, while slashing his earning estimate for the upcoming fiscal year.

Garcha not only sees sluggishness to the global smartphone market and possibly RIM's North American market share, but he also projects that gross margins will languish around the 35% level because of higher costs for new products and implied built-in aggressive pricing in its recent launches.

With cheaper iPhone models expected in the coming year and early favorable reviews of



upcoming Pre touch-screen device, Garcha's suggestion that pricing power will be difficult for smartphone providers makes sense.

Similarly (and ironically), an AmTech note on Tuesday from the Mobile World Congress in Barcelona notes that handset giant


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maintains the economy is "not doing better" and that the fourth quarter and first quarter are playing out worse than expected six months ago.

Garcha cut his price target on RIM to $37; the Wall Street median price target is $57.

RIM is yet another tech stock that is forcing investors to be patient with a company that has plenty to like about it when markets and economies are working at full force. Nothing indicates we're close to that.