Price $22.73 September 21, 2011 (from $25.00) … Nortel ETRI TI Ericsson NSN RIM Freescale Huawei...
Transcript of Price $22.73 September 21, 2011 (from $25.00) … Nortel ETRI TI Ericsson NSN RIM Freescale Huawei...
![Page 1: Price $22.73 September 21, 2011 (from $25.00) … Nortel ETRI TI Ericsson NSN RIM Freescale Huawei NEC page 3 of 12 Peter Misek, CFA, CPA, Equity Analyst , (212) 336-7361 , pmisek@jefferies.com](https://reader030.fdocuments.in/reader030/viewer/2022021419/5ad4d2f47f8b9a5c638c4de0/html5/thumbnails/1.jpg)
USD Prev. 2010A Prev. 2011A Prev. 2012E Prev. 2013E
Rev. (MM) -- 14,953.0 -- 19,907.2 -- 18,994.0 -- 20,942.0
EV/Rev 0.7x 0.5x 0.6x 0.5x
Consensus -- 4.37 -- 6.34 5.09 4.75 5.23 4.81
EPS
May -- 0.98 -- 1.38 -- 1.33A -- 0.86
Aug -- 1.03 -- 1.46 -- 0.80A -- 0.78
Nov -- 1.10 -- 1.74 -- 0.92 -- 0.77
Feb -- 1.27 -- 1.78 -- 0.98 -- 0.79
FY Feb -- 4.37 -- 6.34 -- 4.02 -- 3.21
FY P/E 5.2x 3.6x 5.7x 7.1x
Price Performance
SEP-10 JAN-11 MAY-11 SEP-11
80
60
40
20
COMPANY NOTE
Target Change
USA | Technology | Telecom Equipment/Wireless September 21, 2011
Research in Motion (RIMM)Limited Patent Value; Cut Target to SalvageValue of $21 as We Wait for QNX
EQU
ITY R
ESEARC
H A
MERIC
AS
UNDERPERFORMPrice target $21.00
(from $25.00)Price $22.73
Financial SummaryNet Debt (MM): $(1,415.0)
Market Data52 Week Range: $70.54 - $21.60Total Entprs. Value (MM): $10,497.8Market Cap. (MM): $11,912.8Insider Ownership: 11.5%Institutional Ownership: 63.6%Shares Out. (MM): 524.1Float (MM): 465.7Avg. Daily Vol.: 25,111,962
Peter Misek, CFA, CPA *Equity Analyst
(212) 336-7361 [email protected] North *Equity Associate
(212) 323-3944 [email protected] Kim *
Equity Associate(212) 336-7303 [email protected]
* Jefferies & Company, Inc.
Key TakeawayIn consultation with industry experts, we performed a deep dive on 1,400patents to determine the firms with essential LTE patents. We also analyzed thethree required smartphone patent areas (Wireless, OS/Software, Hardware).With an on-going handset business, RIM's patent monetization value is likelyonly $1B, supporting our $21 cash cow salvage valuation (an unlikely scenariobut could provide valuation support as we wait for QNX).
RIM patents relatively weak: we believe most of RIM's patents are in security rather thanin wireless so may have to pay a fair amount in LTE royalties. We believe the liquidation valueof RIM's patents is only ~$2.5B. We believe the security patents are worth approximately$500M, RIM’s wireless patents are worth approximately $1.2B ($400M LTE plus 3G, etc.),and we add the $770M worth of patents acquired from Nortel. Combining the variouspatents, we arrive at the patent portfolio value of approximately $2.5B.
But with an on-going handset business, RIM's patent monetization likely capsout at ~$1B. In valuing the patents we assume RIM sells its patent portfolio but arrangescross-licensing agreement with other wireless patent holders. The main value would bein licensing the patents to the other third of new and upcoming wireless entrants and inlicensing the security patents where RIM is particularly strong and less cross licensing isrequired. Therefore, we estimate RIM’s patents in a take-out could be worth ~$2.5B butlikely only ~$1B if RIM still sells handsets.
Cash cow salvage value of $21: our analysis is of the scenario whereby the boarddecides to maximize the value of the cash cow subscription annuity stream while minimizinghardware losses. We give this scenario a low probability as we believe the board is unlikelyto challenge the co-CEOs. Also, we do not think any buyers are likely to step in; however,we believe the stock is likely to find a bottom around that level. Calculation: net cash ~$1.5B+ patents ~$1B - restructuring ~$700M + subscription business.
Playbook 2.0 and QNX beta handsets would make us more positive: both shouldinclude native email/calendar, indicating that the major hurdle for the transition to QNX hasbeen overcome. Management said both should be available in coming months.
Valuation/RisksOur $21 target is ~7x our FY13 ests (2-year range 7x-18x). Risks: 1) quicker transition to newOS; 2) stronger new products sales; 3) improved execution.
Jefferies does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Jefferies may have a conflictof interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 10 to 12 of this report.
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Long Term Financial Model Drivers
LT Earnings CAGR 0%
Organic Revenue Growth 5%
Acquisition Contribution 0%
Operating Margin Expansion -5%
Other Considerations
Ripple effect of Playbook execution issues:
our checks indicate the issues have led to
a fire drill and resources being pulled off
of other projects. We think this will cause
QNX delays
2-Year Forward P/E
Source: Capital IQ, Jefferies estimates
0.0x
10.0x
20.0x
30.0x
40.0x
Forward P/E Target
Upside Downside
Research in Motion designs, manufactures and markets wireless devices, communications
solutions and applications globally. The Company is an innovator in the area of wireless
technologies and solutions and provides solutions for wireless connectivity to consumers
and enterprises around the world.
Sell-through of BB OS 7 handsets
Timing of QNX handsets
Signs of enterprise demand for Playbook
Catalysts
Target Investment Thesis
Ripple effect of Playbook execution issues
leading to QNX delays
QNX has integration issues
BB OS 7 phones see lackluster sell-through
Carrier support flagging
Risk to subscriber revenues
FY13EPS: $3.21; Target Multiple: 7x; Target
Price $21.
Upside Scenario
BB OS 7 handsets sell better than expected
Better execution leads to improved carrier
relations
QNX phones comes sooner than expected
FY13 EPS: $3.50; Target Multiple: 9x;
Target Price: $30.
Downside Scenario
Competition even fiercer than expected
leading to ASP and margin erosion
QNX phones pushed out
FY13 EPS: $3; Target Multiple: 7x Target
Price: $18.
Long Term Analysis
Scenarios
Group 2-Year Forward P/Es
Source: Capital IQ, Jefferies estimates
4.6x
12.7x
8.1x
27.5x
16.8x
4.6x7.6x 8.6x
0x
5x
10x
15x
20x
25x
30x
Earnings Growth vs 2-Year Forward P/E
Source: Capital IQ, Jefferies estimates
RIMM
AAPLHTC
MMI
NOK
HPQ
DELLMSFT
-40%
-20%
0%
20%
40%
60%
0x 10x 20x 30x
Recommendation / Price Target
Ticker Rec. PT
RIMM Underperform $21
AAPL Buy $500
HTC NC N/A
MMI Hold $40
NOK Hold €3.91
HPQ Buy $40
DELL Hold $15
MSFT NC N/A
Company Description
THE LO
NG
VIE
W
Peer Group
Research in Motion, Inc.
Underperform: $21 Price Target
page 2 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Proprietary Essential LTE Patent Analysis Please reference our concurrently published industry note “Smartphone Patent Wars Far
From Over: Deep Dive Into Essential LTE Patents” for additional details.
In valuing the essential LTE patent portfolios of major players in the wireless space, we
utilized outside industry experts that included physics PhDs, wireless engineers, patent
legal specialists, and former patent office employees.
Our work began by first screening tens of thousands of patents and then determined a
level of essentiality based on individually examining over 1,400 patents related to LTE.
Patents are difficult to value
Most attempts to value patents focus either on 1) counting the total number of patents a
company has, but the important number is the number of essential patents, 2) counting
the essential patents in the ETSI library, but this data is self-reported. Alternatively, the
essentiality of LTE patents can be determined by lawsuit decisions (none yet), licensing
agreements, or purchases. Of the latter two, there is no public data apart from the $4.5B
purchase of Nortel's patent portfolio.
Our methodology for LTE
Industry experts performed a proprietary analysis comparing each company’s patents to
the LTE standards and determined their essentiality. Then we analyzed Nortel's portfolio
and estimated how much of the purchase price was likely for the LTE patents. Nortel's
patents were in five categories, but we believe about half of the value was in the wireless
patents, and that a majority of the wireless value was in the LTE patents. In our LTE patent
valuation analysis we assume 30% of the $4.5B acquisition price was for the LTE patents.
We note that these values are rough estimates and only for the LTE portion of their
portfolios (3G patents will also determine a significant portion of value).
Exhibit 1: Essential LTE Patents
Source: Jefferies & Co.
0% 5% 10% 15% 20% 25%
LGQualcommInterDigital
MotorolaNokia
SamsungZTE
NortelETRI
TIEricsson
NSNRIM
FreescaleHuawei
NEC
page 3 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Exhibit 2: Essential LTE Patents: Detail
Source: Jefferies & Co.
RIM Cash Cow Salvage Valuation JEF: cash cow salvage value for RIM of $21; patents likely only worth ~$1B
Our analysis is of the scenario whereby the board decides to maximize the value of the
cash cow subscription annuity stream while minimizing hardware losses. We give this
scenario a low probability as we believe the board is unlikely to challenge the co-CEOs.
Also, we do not think any buyers are likely to step in.
We assume the hardware business will be run at breakeven and the subscription business
will be run as a cash cow.
In order to calculate a liquidation value for RIMM, we assume the following
Net cash ~$1.5B.
Patents monetized for $1B: RIMM has ~2,000 patents in the U.S., ~3,200 in
Europe, and ~3,000 in Canada though its share of essential patents is unclear
and estimates of RIMM's share of essential LTE patents ranges from 0% to 10%.
Overall, we believe RIMM has a solid patent position that is big enough to defray
some royalty costs but not all (e.g., RIMM settled with MMI for an upfront
payment and on-going fees) and that many of RIMM’s stronger patents are in
security rather than in wireless. We assume RIMM sells its patent portfolio but
arranges cross-licensing agreement with other wireless patent holders. The main
value would be in licensing the patents to the other ~33% of new and
upcoming wireless entrants. We estimate RIMM’s patents in a take-out could be
worth ~$2.5B but likely only ~$1B if RIMM still sells handsets.
Breakeven hardware business: RIMM aims to run the hardware business at
breakeven by gutting R&D and SG&A, ditching QNX, and exiting tablets.
Basically, RIMM continue to offer the same messaging-focused handsets at the
lowest price possible while remaining cash flow breakeven in the segment.
Patent Holder
% Ownership of
Essential LTE Patents Estimated Value ($M)
LG 23% 7,907
Qualcomm 21% 7,329
InterDigital 9% 3,279
Motorola 9% 3,279
Nokia 9% 3,086
Samsung 9% 3,086
ZTE 6% 2,121
Nortel 4% 1,350
ETRI 2% 771
TI 2% 771
Ericsson 2% 579
NSN 2% 579
RIM 1% 386
Freescale 1% 193
Huawei 1% 193
NEC 1% 193
page 4 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Restructuring cash charge of $700M: in this scenario we assume layoffs of
80% of the workforce and severance payments of $50K/person.
Subscription business as a cash cow: we assume 80% GM and 54% initial
OM for the segment. We run a sensitivity analysis with various churn and ASP
decline assumptions to calculate an NPV for the segment. We assume that opex
declines in line with subscriber deterioration.
Table 1: NPV of Cash Flow from Cash Cow Subscription Business
Source: Jefferies
The share price calculation then is $1.5B net cash + $1B (patents) - $700M restructuring
charge + subscription NPV all divided by 524M shares outstanding.
Table 2: Share Price based on Cash Cow Subscription Business
Source: Jefferies
Conclusion
A 2.5% annual rate decline and 2% annual subscriber decline implies a $21 stock price.
Again, we believe this scenario is unlikely but likely provides some type of floor for the
stock.
## 0% 2.5% 5.0% 7.5% 10.0%
0% 13,148 10,250 8,130 6,612 5,514
1% 12,260 9,732 7,835 6,439 5,407
2% 11,333 9,177 7,513 6,248 5,289
3% 10,415 8,611 7,175 6,045 5,162
4% 9,569 8,067 6,835 5,835 5,031
5% 8,820 7,563 6,506 5,623 4,894
6% 8,169 7,106 6,193 5,415 4,757
7% 7,604 6,698 5,904 5,214 4,618
8% 7,116 6,330 5,637 5,024 4,486
9% 6,690 6,003 5,393 4,843 4,352
10% 6,317 5,710 5,169 4,672 4,231
Annual Rate Decline
An
nu
al S
ub
scri
be
r D
ecl
ine
0% 2.5% 5.0% 7.5% 10.0%
0% $28.53 $23.00 $18.95 $16.05 $13.96
1% $26.83 $22.01 $18.39 $15.72 $13.75
2% $25.06 $20.95 $17.77 $15.36 $13.53
3% $23.31 $19.87 $17.13 $14.97 $13.29
4% $21.70 $18.83 $16.48 $14.57 $13.04
5% $20.27 $17.87 $15.85 $14.17 $12.77
6% $19.02 $17.00 $15.25 $13.77 $12.51
7% $17.95 $16.22 $14.70 $13.39 $12.25
8% $17.02 $15.51 $14.19 $13.02 $12.00
9% $16.20 $14.89 $13.73 $12.68 $11.74
10% $15.49 $14.33 $13.30 $12.35 $11.51
Annual Rate Decline
An
nu
al S
ub
scri
be
r D
ecl
ine
page 5 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Exhibit 3: Quarterly Estimates
Source: company filings, Jefferies estimates
Exhibit 4: Annual Estimates
Source: company filings, Jefferies estimates
(Feb FY; $B) (Non-GAAP) FY11A Est Street Est Street
Revenue 19.9 4.8 5.6 5.1 5.2
Gross Profit 8.8 1.8 2.2 1.9 2.0
GM 44.3% 37.0% 38.6% 36.9% 38.7%
SG&A 2.4 0.7 0.7
R&D 1.4 0.4 0.4
EBITDA 5.1 0.8 1.2 0.8 1.1
EBITDA Margin 25.5% 15.8% 21.7% 15.8% 21.0%
EBIT 4.6 0.6 1.0 0.7 0.9
OM 23.3% 12.8% 17.7% 12.9% 16.3%
EPS (fd) 6.34 0.92 1.51 0.98 1.24
(Feb FY; M) FY11A Est Street Est Street
Playbooks 0.0 0.4 0.4
Phones 52.3 13.0 14.0
ASP (Handset) 305 279 274
ASP (Tablet) 300 300
Net Adds 19.8 3.1 3.9
FQ3E (Nov)
FQ3E (Nov) FQ4E (Feb)
FQ4E (Feb)
(Feb FY; $B) (Non-GAAP) FY11A Est Street Est Street
Revenue 19.9 19.0 20.1 20.9 21.7
Gross Profit 8.8 7.4 8.0 7.8 8.3
GM 44.3% 39.2% 39.6% 37.1% 38.4%
SG&A 2.4 2.7 3.2
R&D 1.4 1.5 1.7
EBITDA 5.1 3.2 4.3 2.8 4.6
EBITDA Margin 25.5% 17.1% 21.4% 13.6% 21.1%
EBIT 4.6 2.5 3.2 2.2 3.4
OM 23.3% 14.1% 15.7% 10.3% 15.7%
EPS (fd) 6.34 4.02 4.78 3.21 4.89
(Feb FY; M) FY11A Est Street Est Street
Playbooks 0.0 1.5 1.8
Phones 52.3 50.8 58.5
ASP (Handset) 305 277 271
ASP (Tablet) 347 295
Net Adds 19.8 16.1 (4.0)
FY12E
FY13EFY12E
FY13E
page 6 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Research in Motion Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E Q1E Q2E Q3E Q4E FY FY11 FY12E FY13E
Income Statement May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 Feb-10 Feb-11 Feb-12 Feb-13
Services and Softw are 757 843 913 979 1,030 1,075 1,030 1,081 1,152 1,066 1,077 1,085 2,417 3,492 4,216 4,380
Devices and Other 3,478 3,779 4,582 4,577 3,878 3,093 3,797 4,011 3,707 3,929 4,278 4,648 12,536 16,416 14,779 16,562
Total Revenue 4,235 4,621 5,495 5,556 4,908 4,168 4,827 5,092 4,859 4,995 5,355 5,733 14,953 19,907 18,994 20,942
Cost Of Goods Sold
Services and Softw are 110 123 133 143 152 158 152 160 225 208 207 209 350 509 621 849
Devices and Other 2,202 2,443 2,968 2,960 2,600 2,398 2,891 3,052 2,733 2,888 3,189 3,512 8,019 10,573 10,941 12,321
Cost Of Goods Sold 2,312 2,566 3,101 3,103 2,752 2,556 3,043 3,211 2,958 3,096 3,396 3,720 8,369 11,082 11,563 13,171
Gross Profit 1,923 2,056 2,394 2,453 2,156 1,612 1,783 1,880 1,901 1,899 1,959 2,012 6,584 8,826 7,432 7,771
Selling General & Admin Exp. 483 546 666 705 704 683 683 697 749 792 838 863 1,811 2,400 2,767 3,243
R & D Exp. 288 323 357 383 423 381 375 381 400 420 426 439 965 1,351 1,560 1,686
Amort. of Goodw ill and Intangibles 94 104 115 125 132 141 141 148 157 166 176 187 310 438 562 687
Opex 865 974 1,138 1,213 1,259 1,205 1,199 1,226 1,306 1,379 1,441 1,490 3,250 4,189 4,888 5,615
Operating Income 1,059 1,082 1,256 1,240 897 407 585 655 595 520 518 523 3,334 4,636 2,544 2,156
Investment Income 9 6 -11 3 7 7 8 9 8 8 8 9 29 8 31 33
EBT Excl. Unusual Items 1,068 1,088 1,245 1,243 904 414 593 664 603 528 526 532 3,363 4,644 2,575 2,189
Income Tax Expense 299 292 334 309 209 85 136 153 145 120 126 120 984 1,233 583 511
Net Earnings (reported) 769 797 911 934 695 329 457 511 458 409 400 411 2,491 3,411 1,992 1,678
Per Share Items
Basic EPS 1.39 1.46 1.74 1.79 1.33 0.63 0.87 0.98 0.88 0.78 0.77 0.79 4.41 6.36 3.80 3.21
Weighted Avg. Basic Shares Out. 554.7 544.1 522.4 522.8 524.0 524.1 523.7 523.3 523.4 522.8 522.3 521.8 564.5 536.0 523.8 522.6
Diluted EPS 1.38 1.46 1.74 1.78 1.33 0.63 0.87 0.98 0.87 0.78 0.77 0.79 4.37 6.34 3.80 3.21
Diluted EPS (Non-GAAP) 1.38 1.46 1.74 1.78 1.33 0.80 0.92 0.98 0.87 0.78 0.77 0.79 4.37 6.34 4.02 3.21
Weighted Avg. Diluted Shares Out. 558.2 546.4 524.4 525.0 524.5 524.1 523.7 523.3 523.5 523.0 522.5 521.9 569.8 538.3 523.9 522.7
Source: company data; Jefferies & Company, Inc. estimates
page 7 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Research in Motion Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E Q1E Q2E Q3E Q4E
Balance Sheet May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13
ASSETS
Cash And Equivalents 1,135 1,083 1,286 1,551 1,850 1,152 1,435 1,791 1,986 851 784 850 1,221 1,527 1,917 1,747
Short Term Investments 620 581 341 361 498 380 340 330 403 298 313 329 345 362 380 399
Total Cash & ST Investments 1,755 1,664 1,628 1,911 2,348 1,532 1,776 2,121 2,389 1,149 1,097 1,178 1,566 1,889 2,297 2,146
Accounts Receivable 2,338 2,365 2,712 2,594 2,650 3,216 4,101 3,955 3,772 3,571 3,819 3,917 3,738 3,842 4,119 4,410
Other Receivables 217 248 210 206 136 148 240 324 463 627 477 504 481 494 530 567
Total Receivables 2,555 2,613 2,922 2,800 2,786 3,364 4,340 4,279 4,235 4,198 4,297 4,420 4,218 4,336 4,649 4,977
Inventory 634 573 613 622 556 645 679 618 943 1,372 1,070 882 650 680 746 818
Deferred Tax Assets, Curr. 226 176 212 194 228 221 224 229 226 221 221 221 221 221 221 221
Other Current Assets 179 190 199 286 310 217 280 241 307 380 418 460 506 556 612 673
Total Current Assets 5,349 5,215 5,574 5,813 6,228 1,083 1,183 1,088 1,476 1,973 1,709 1,563 1,377 1,458 1,579 1,712
Net Property, Plant & Equipment 1,509 1,737 1,844 1,957 2,075 2,169 2,343 2,504 2,576 2,699 2,858 3,012 3,154 3,302 3,458 3,608
Long-term Investments 664 834 781 958 919 494 696 577 478 266 266 266 266 266 266 266
Goodw ill 141 147 147 151 162 375 375 508 524 606 679 688 697 706 715 724
Other Intangibles 1,172 1,291 1,359 1,326 1,298 1,421 1,372 1,798 2,164 2,307 2,379 2,296 2,208 2,112 2,010 1,900
Total Assets 8,835 9,224 9,704 10,204 10,683 10,439 12,085 12,875 13,842 13,198 13,285 13,424 13,486 14,070 14,974 15,333
LIABILITIES
Accounts Payable & Accrued expenses 2,007 2,002 2,450 2,254 2,308 2,815 3,553 3,343 3,862 3,672 3,478 3,281 3,250 3,401 3,880 3,801
Curr. Income Taxes Payable 92 - 140 96 78 116 188 179 0 0 0 0 0 0 0 0
Unearned Revenue, Current 64 67 70 68 71 79 90 108 105 106 111 117 123 129 135 142
Def. Tax Liability, Curr. - - - 15 26 8 4 0 0 0 0 0 0 0 0 0
Other Current Liabilities 102 98 92 - 37 0 0 0 0 0 0 1 1 1 1 1
Total Current Liabilities 2,266 2,167 2,752 2,432 2,521 3,018 3,834 3,630 3,967 3,778 3,590 3,399 3,374 3,531 4,016 3,944
Def. Tax Liability, Non-Curr. 54 43 103 141 135 179 217 276 256 270 270 270 270 270 270 270
Other Non-Current Liabilities 27 28 28 29 29 29 30 31 31 11 11 11 11 11 11 11
Total Liabilities 2,347 2,238 2,884 2,602 2,684 208 247 307 287 281 281 281 281 281 281 281
Stock 2,353 2,375 2,350 2,372 2,368 1,989 2,145 2,199 2,202 2,394 2,406 2,418 2,430 2,442 2,454 2,467
Retained Earnings 4,189 4,664 4,564 5,274 5,656 5,027 5,815 6,749 7,444 7,586 7,843 8,154 8,223 8,631 9,031 9,442
Comprehensive Inc. and Other -53 -53 -94 -43 -25 198 44 -10 -58 -63 -57 -49 -43 -37 -31 -23
Total Common Equity 6,488 6,987 6,820 7,603 7,999 7,214 8,004 8,938 9,588 9,917 10,192 10,523 10,610 11,036 11,455 11,886
Total Liabilities And Equity 8,835 9,224 9,704 10,204 10,683 10,439 12,085 12,875 13,842 13,976 14,063 14,202 14,264 14,848 15,752 16,111
Source: company data; Jefferies & Company, Inc. estimates
page 8 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Research in Motion Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E Q1E Q2E Q3E Q4E FY10 FY11 FY12E FY13E
Cashflow Statement May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 Feb-10 Feb-11 Feb-12 Feb-13
Net Income 768.9 796.7 911.1 934.3 695.0 329.0 456.6 511.0 1,991.6 458.0 408.5 399.7 2,457.1 3,411.0 1,991.6 1,677.7
Depreciation & Amort. 107.1 208.2 222.1 310.5 355.0 354.0 141.0 148.1 998.1 156.9 166.3 176.3 344.5 927.0 998.1 686.5
Stock-Based Compensation 15.9 16.8 19.3 19.9 23.0 15.0 6.5 7.5 52.0 6.0 6.0 6.5 58.0 72.0 52.0 26.0
Other Operating Activities (10.2) 14.0 44.3 46.9 24.0 (24.0) 0 0 0 0 0 0 64.8 95.0 0 0
Change in w orking capital 162.6 (127.5) (224.0) (307.1) (77.0) (723.0) (23.2) (168.3) (991.5) 363.0 (41.5) 51.2 (160.7) (496.0) (991.5) (160.0)
Cash from Ops. 1,123.5 908.2 972.8 1,004.5 1,020.0 (49.0) 580.9 498.2 2,050.1 983.9 539.4 633.8 3,034.9 4,009.0 2,050.1 2,230.2
Capital Expenditure (226.1) (208.0) (301.1) (303.8) (222.0) (287.0) (200.9) (198.9) (908.8) (188.9) (198.4) (208.3) (1,009.4) (1,039.0) (908.8) (801.9)
Cash Acquisitions (14.1) (318.8) 0 (161.1) (27.0) (103.0) 0 0 (130.0) 0 0 0 (143.4) (494.0) (130.0) 0
Sale (Purchase) of Intangible assets (42.4) (104.4) (45.5) (364.7) (560.0) (244.0) (244.0) (30.0) (1,078.0) (30.0) (30.0) (30.0) (421.4) (557.0) (1,078.0) (120.0)
Invest. in Marketable & Equity Securt. (103.2) 542.7 (173.5) 1,559.4 27.0 (463.0) (14.9) (15.6) 310.9 (16.4) (17.2) (18.1) 104.1 1,825.5 310.9 (71.4)
Net (Inc.) Dec. in Loans Originated/Sold - -
Other Investing Activities - -
Cash from Investing (385.8) (88.5) (520.1) 729.8 (782.0) (1,097.0) (459.8) (244.5) (1,805.9) (235.4) (245.6) (256.4) (1,470.1) (264.5) (1,805.9) (993.3)
Long-Term Debt Repaid - - - - - - - - - - - - (6.1) - - -
Total Debt Repaid - - - - - - - - - - - - (6.1) - - -
Issuance of Common Stock 8.4 3.6 5.0 50.0 7.0 1.0 12.0 12.0 32.0 12.1 12.2 12.2 30.2 67.0 32.0 48.7
Repurchase of Common Stock (416.9) (1,548.6) (171.1) (16.5) (26.0) (11.0) (200.0) (200.0) (437.0) (389.0) 0 0 (869.5) (2,153.0) (437.0) (389.0)
Other Financing Activities (0.6) 0.3 0.0 (0.7) (1.0) 0 0 0 0.6 0 0 0 1.9 (0.4) 0.6 0.6
Cash from Financing (409.0) (1,544.7) (166.0) 32.8 (20.0) (10.0) (188.0) (188.0) (404.4) (376.9) 12.2 12.2 (843.4) (2,086.4) (404.4) (339.7)
Foreign Exchange Rate Adj. (29.3) 26.8 (3.3) 21.8 (23.0) 21.0 0 0 (2.0) 0 0 0 (6.1) 16.0 (2.0) 0
Net Change in Cash 299.3 (698.1) 283.4 1,788.9 195.0 (1,135.0) (66.9) 65.7 (162.2) 371.7 305.9 389.6 715.3 1,674.0 (162.2) 897.2
Source: company data; Jefferies & Company, Inc. estimates
page 9 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Company DescriptionResearch in Motion designs, manufactures and markets wireless devices, communications solutions and applications globally. The Companyis an innovator in the area of wireless technologies and solutions and provides solutions for wireless connectivity to consumers and enterprisesaround the world.
Analyst CertificationI, Peter Misek, CFA, CPA, certify that all of the views expressed in this research report accurately reflect my personal views about the subjectsecurity(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specificrecommendations or views expressed in this research report.I, Jason North, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) andsubject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendationsor views expressed in this research report.I, Billy Kim, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subjectcompany(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or viewsexpressed in this research report.
As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receivescompensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research asappropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majorityof reports are published at irregular intervals as appropriate in the analyst's judgement.
For Important Disclosure information on companies recommended in this report, please visit our website at https://javatar.bluematrix.com/sellside/Disclosures.action or call 212.284.2300.
Meanings of Jefferies RatingsBuy - Describes stocks that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.Hold - Describes stocks that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period.Underperform - Describes stocks that we expect to provide a total negative return (price appreciation plus yield) of 10% or more within a 12-monthperiod.The expected total return (price appreciation plus yield) for Buy rated stocks with an average stock price consistently below $10 is 20% or more withina 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated stocks with an average stock priceconsistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For Underperformrated stocks with an average stock price consistently below $10, the expected total return (price appreciation plus yield) is minus 20% within a 12-month period.NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/or Jefferies policies.CS - Coverage Suspended. Jefferies has suspended coverage of this company.NC - Not covered. Jefferies does not cover this company.Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securitiesregulations prohibit certain types of communications, including investment recommendations.Monitor - Describes stocks whose company fundamentals and financials are being monitored, and for which no financial projections or opinions onthe investment merits of the company are provided.
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Risk which may impede the achievement of our Price TargetThis report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, thefinancial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions basedupon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance ofthe financial instruments recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, andincome from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financialand political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates mayadversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities suchas ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk.
page 10 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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Other Companies Mentioned in This Report• Apple Inc. (AAPL: $413.45, BUY)• Dell (DELL: $14.88, HOLD)• Hewlett-Packard (HPQ: $22.47, BUY)• Motorola Mobility Holdings, Inc. (MMI: $37.82, HOLD)• Nokia (NOK1V FH: €3.89, HOLD)• ZTE Corporation (763 HK: HK$21.20, BUY)
Distribution of RatingsIB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY 710 53.70% 32 4.51%HOLD 540 40.90% 31 5.74%UNDERPERFORM 71 5.40% 2 2.82%
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page 11 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011
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page 12 of 12 , Equity Analyst , (212) 336-7361 , [email protected] Misek, CFA, CPA
Please see important disclosure information on pages 10 - 12 of this report.
RIMM
Target Change
September 21, 2011