RIM: Barclays Cuts To Hold On QNX Delays

Barclays Capital’s Jeff Kvaal this morning cut his rating on shares of Research in Motion (RIMM) to Equal Weight from Overweight, and cut his price target to $23 from $40, writing that the company’s current drastically low P/E multiple of four times forward earnings will be hard to shake given what he sees as the lag in getting to the company’s next phone operating system, the “QNX” software platform, which RIM is now calling “BBX.”

“We believe QNX smartphones are delayed beyond management�s last public statements of a 1Q12 release,” writes Kvaal.

“RIM�s preference to hold the launch until fully ready is the correct decision in our view, though it does imply that management is anticipating delays in the launch.”

He goes on:

DEVCON unveiled limited additional details around the timing and availability of the platform and rather injected another dose of uncertainty with the�2011�?introduction of BBX. Putting this aside, our math on carrier certification timelines which require at least six months in the US suggests a late 1Q12 launch at best, assuming crisp execution since management�s last statements. Our checks indicate that RIM has made a concerted push around the development efforts of QNX. However, we believe technical challenges are high as we have seen with the delay of Playbook 2.0, and we therefore consider a mid-year launch more likely and our checks across the distribution channel support this view.

Kvaal cut his fiscal 2013 estimate to $21.9 billion from $22.6 billion in revenue, and cut his EPS model to $4.74 from $5.02. He now sees the company shipping 56.5 million smartphone units in the fiscal year, down from 60 million previously. He also cut his estimate for the company’s “PlayBook” tablet computer to 1 million from 2 million.

Kvaal notes the company’s “impressive” subscriber momentum, with 70 million users in the most recent quarter, up 40%, and he ticks off various advantages for the company:

RIM retains a very strong presence in the enterprise email market, a leading instant messaging application in BBM, and the leading QWERTY devices at the right price points. Strength in international markets � the UK is a particular standout � has offset an uninspiring US market. International sales now represent over 70% of revenues.

“Unfortunately for RIM, its own product migration challenges have obscured the growth in net additions,” Kvaal goes on. “These product delays are allowing RIM�s competition to encroach upon RIM�s traditional strengths.” And he notes share loss to Apple’s (AAPL) iOS platform and Google’s (GOOG) Android.

RIM shares today are down a penny at $18.88.