BlackBerry shares slip after downgrading; sales to slump

March 26th, 2009 - 1:45 pm ICT by IANS  

Toronto, March 26 (IANS) The shares of BlackBerry maker Research In Motion (RIM) fell sharply on the Toronto Stock Exchange and Nasdaq Wednesday after its downgrading by JPMorgan Chase.
RIM shares dived 4.4 percent to close at $52.39 after an analysis by the global financial services firm said that the Canadian company will experience slower growth over the next one and a half years.

On Nasdaq also, the wireless communication giant slipped by $1.31 to close at $42.92 after its downgrading.

The JP Morgan Chase analysis said that the BlackBerry maker will find it difficult to maintain its growth rate amid the global meltdown. As corporates resort to lay-offs and belt-tightening, the analysis said, BlackBerry sales too will slow down.

With its clients - corporate executives - losing jobs fast, RIM will have to depend more on consumers to sustain its sales in the coming 18 months, according to the JP Morgan Chase report. The report said, “We believe RIM’s current replacement rate of 69 per cent for full-year 2009 - implying users replace their BlackBerrys every 1.5 years - is unsustainably high in the current environment.”

Though the Waterloo-based RIM is expanding into more and more countries, the report predicted that the replacement rate for BlackBerry smart phones will decline to 43 per cent in the coming period. “We believe replacement rates should decline with the overall handset market and as the company pushes more into international (markets) where replacement rates are significantly lower than in the US,” the JP Morgan analysis said.

At one time last year, RIM shares traded as high as $50, plunging to as low as $43 as the economic meltdown spread.

A secure device for e-messaging for corporate executives, BlackBerry has a subscriber base of over 21 million in about 150 countries.

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