RIM co-CEOs Mike Lazaridis, left, and Jim Balsillie.Mike Cassese/Reuters
Is Research In Motion Ltd. now a takeover target? Investors hope so: They drove RIM's shares higher on Wednesday morning following reports that the likes of Microsoft Corp., Nokia Corp. and Amazon.com Inc. had been kicking the tires on the beaten-up BlackBerry maker in the summer.
However, Kris Thompson, an analyst at National Bank Financial, thinks that investors should be selling into the rally. He reiterated his "underperform" recommendation on the stock, along with an $8 (U.S.) price target.
He explained his lack of enthusiasm in a note: "We continue to view near-term M&A for RIM as very unlikely given the company's dismal performance and uncertain outlook. We predict BlackBerry unit shipments will deteriorate significantly into next year ahead of BB10 product launches; this has to scare buyers off for now."
He also doesn't expect the company's co-chief executives – a sore spot with many investors now that the company has been struggling with market share and marketing credibility – to depart any time soon, given that they've slashed their annual salaries to $1.
"The pop today could be accelerated by some short covering (38 million shares short at the end of November)," Mr. Thompson said. "We'd be selling into rallies led by M&A speculation. We continue to expect the stock will trade into the single digits as the company's fundamentals worsen. We expect the vultures to circle and to wait for a lower entry point; if M&A bids surface."
David Berman