Research in Motion Ltd or RIM is likely to run out of its cash reserves and head for a decline, notwithstanding the launch of the delayed BlackBerry 10 early next year, according to market experts.
As many as 10 brokerage firms on the Wall Street have cut their target prices on the share of the firm, some of them slashing it by 50 %. This comes a day after the company reported its worst ever quarterly results and announced that its next generation device will be delayed in its launch to early half of 2013 as against the expected latter half of this year.
On the Nasdaq, the shares were down by 16% in pre-market trading.
Many analysts could be cited saying that if the present run of the firm continues, then it is not long before the firm eventually fails.
Even with the launch of the BB10 next year, it is not expected that the company will be able to achieve a turnaround of its financials. One of the brokerage firms, in its model on RIM, is expecting RIM to disappear by 2010 through a gradual decline.
BB10, the make or break product for the beleaguered firm, has already led to a 40 % drop in the stock of the firm from the start of the year with the delayed product being originally slated to release in the first quarter of this year. But given the cash burn at RIM, BB10’s launch can’t be expected soon enough, Barclays commented.
Citi and Jeffries have slashed their price targets on the stock to $5, which is a 45 % decline from its last closing price.
The fundamentals for RIM are seemingly getting worse and RIMM could very well run out of cash with a need of raising capital over the next two years and it’s expected that RIMM will continue to go lower, one of the Citi analysts said.
There are huge write offs and impairments to its assets and the new BB10 product might not even matter as it might prove to be very late. The sales growth for its smartphone is expected to be one half of the industry average for the current calendar year.
RIM had earlier announced that it will be laying off around 5000 workers, amounting to 30 % of its workforce, in its attempt to save on cash; although market experts believe that they should be hiring instead for getting the products out on time.