Research In Motion could become a specialized company that doesn't compete head-on with Apple or Android devices in the consumer market now that the struggling BlackBerry maker has announced plans to rebuild itself, analysts said Friday.
"Ultimately, what I think RIM ends up doing is becoming a smaller company," said Evercore Partners analyst Alkesh Shah.
"It will be more software and services-focused," Shah said from New York.
New CEO Thorstein Heins told analysts late Thursday that RIM (TSX:RIM) will shift more attention to its business users, and stop pursuing the consumer market as aggressively as it has in recent quarters.
"They're going to be a smaller company, than say Apple or Samsung, but they could potentially be an incredibly profitable company as they become a part of many of the devices and smartphone tablets that are sold around the world," Shah said of RIM's technology.
RIM could license its popular texting service, BlackBerry Messenger and its encryption technology that gives its BlackBerrys security, he said.
"Who do you think of when you think of secure communication? You think of BlackBerrys and RIM."
RIM could also help companies manage their networks to allow employees to use iPhones and Android smartphones in the workplace without security fears, Shah added.
Shares of Research In Motion (TSX:RIM) rose more than three per cent in early trading Friday, as investors reacted to the BlackBerry maker's revised business plan.
Stock of the Waterloo, Ont.-based company was up 44 cents, or 3.2 per cent, to $14.11 on the Toronto Stock Exchange.
William Blair & Co. analyst Anil Doradla also said RIM is now going to focus more on its business customers after not being totally successful in the consumer market.
"They're saying, 'Let's focus on our core strength. Let's focus on enterprise. Once we get that stability on that front, then we will start looking at the consumer side,"' said Doradla, who's based in Chicago.
The change of direction came as the company posted a loss of US$125-million in the most recent quarter. RIM, which had been expected to show a profit when it reported after the markets closed on Thursday, attributed the weaker results primarily to a $355-million asset writedown, reflecting the reduced value of its business.
The loss equalled 24 cents US per share compared with a profit of US$934 million, or $1.78 per diluted share, a year ago. Excluding one-time charges, RIM reported an adjusted profit of $418 million, or 80 cents per share.
Revenue fell to $4.2 billion, from $5.6 billion a year earlier.
The average analyst estimate had been for a profit of 81 cents per share and revenue of $4.54 billion, according to estimates compiled by Thomson Reuters.
Analysts had expected the company to ship 11.5 million BlackBerrys in the quarter but it reported only about 11.1 million were sold.
New CEO Heins said Research In Motion will focus more on its core business users: "We plan to refocus on the enterprise business and capitalize on our leading position in this segment."
National Bank Financial analyst Kris Thompson said RIM is going back to its roots, but that it could be a risky move.
"Our view is that RIM is once again focusing on its enterprise roots, which is not the fastest growing market," Thompson wrote in a research note.
Also on Thursday, RIM co-founder Jim Balsillie, 52, announced his retirement. Balsillie had remained a director since losing his job as co-chief executive and co-chairman of the company in January.
Balsillie was, for many years, the main spokesman for the company as it grew from a small niche technology maker into a global smartphone leader. He had shared the CEO and chairman roles with RIM co-founder Mike Lazaridis.
Activist shareholder Vic Alboini and chief executive of Jaguar Financial, who had been pushing for Balsillie to leave the company, said the departure of the former co-CEO was expected.
He also said the decision to pursue a strategic review has been a long time coming and could help push up the company's value.
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