Caris & Co. said concerns of looming competition for the maker of the BlackBerry wireless handheld device were “overdone” and initiated coverage on Research in Motion with a “buy” rating.
“We believe the concerns about margin pressure from price competition, inexpensive entry phones and potentially low take rates for smartphones are overdone,” said Caris. “New high-end smartphones for mobile computing and low-end phones for developing countries may exceed sales estimates, and the manufacturers could gain operating leverage through scale benefits, improving margins.”
The research firm noted, however, the company faces “a growing threat to its proprietary software platform, though this looks reasonably confined within the next one to two years.” Caris noted Microsoft looks to close the gap with the release of an upgrade to its mobile operating system last June.
“To overtake Research in Motion, however, Microsoft would need to convince enterprises to deploy its Exchange Server 2003, and hardware manufacturers Hewlett-Packard and Dell would have to upgrade features to compete with the BlackBerry,” said Caris. “Software makers are closing in on developing Push technology that is at parity with Research in Motion’s offering, however, we believe Research in Motion’s embedded base gives them protection from gains from competitors.”