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'Essentially broken' RIM's shares sink to lowest point since 2003

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RESEARCH In Motion Ltd. (TSX:RIM) shares hit their lowest level since 2003 on Monday as the company was downgraded by investment firm Morgan Stanley, which called the company "essentially broken."

Morgan Stanley's Ehud Gelblum said while the troubles at RIM are well-known, the investment firm believes estimates for the company need to come down even further over the next six months.

"We believe the fundamental story at RIM is essentially broken and that the most likely way to unlock value from the company is through either a strategic option or selling off the operations," Gelblum said as the bank downgraded the company to "underweight."

"We therefore believe the next six to nine months are likely filled with the competing factors of rapidly deteriorating fundamentals on the one hand and stories of potential strategic options on the other, leaving the stock pushed and pulled strongly in both directions."

Shares in RIM traded as low as $9.27 on Monday on the Toronto Stock Exchange, its lowest level since 2003 after adjusting for stock splits. The stock closed down 76 cents at $9.36.

The drop came as RIM dismissed a weekend Sunday Times report that suggested the company was considering selling its handset manufacturing unit or a stake in the whole company.

Speculation that RIM may be sold or broken up increased earlier this year after the company hired JPMorgan Chase & Co. and RBC Capital Markets to help evaluate its strategic options.

"RIM has hired advisers to help the company examine ways to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives," RIM said in a statement. "As (CEO) Thorsten (Heins) said on the company's fourth-quarter earnings call: 'We believe the best way to drive value for our stakeholders is to execute on our plan to turn the company around.' This remains true."

RIM is scheduled to report its latest quarterly earnings results Thursday and provide a business update to investors.

The average analyst estimate is for a profit of a penny per share and $3.13 billion in revenue, according to those surveyed by Thomson Reuters.

Scotiabank analyst Gus Papageorgiou said investors will be looking for a clear message from the company when it reports its earnings on Thursday.

"From an outside perspective, putting the company up for sale seems to be a rational and realistic alternative given the seeming insurmountable challenges it faces," Papageorgiou wrote in a note to clients.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition June 26, 2012 B3

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