RIM shares hit, competitive threat spurs downgrade

TORONTO (Reuters) - Shares of BlackBerry maker Research In Motion <RIM.TO> <RIMM.O> fell more than 6 percent on Monday after an analyst told investors to sell the stock because of mounting competition from other smartphone makers.

"Simply put, there is an invasion of new phones, applications, and competition," Citi Investment Research analyst Jim Suva wrote to clients. He cut his rating to "sell" from "buy".

"The revolution of product and application service offerings is going to start to crack open the enterprise door and pose a risk for Blackberry," Suva wrote.

"Much of RIM's growth recently has been driven by the consumer, who will soon have more choices with more compelling software and hardware features."

He cited the launch of a Motorola <MOT.N> smartphone running on Google's <GOOG.O> Android operating system as being among the key competitive threats that RIM faces.

As well, he upgraded Motorola to "buy" from "hold." Motorola shares were up 4.6 percent at $8.96 on the New York Stock Exchange.

Suva also wrote that wireless carriers such as U.S.-based Verizon <VZ.N> are likely going to slow down their promotion spending on BlackBerry and shift it toward phones like Motorola's.

"We believe Verizon accounted for as much as 28 percent of RIM's sales, which is indeed a marketing shift not to be taken lightly."

He expects RIM will react by increasing its own promotional and marketing spending, which will lead to higher expenses and lower margins and profit.

RIM's shares were down C$4.11, or 6.4 percent, at C$59.71 on the Toronto Stock Exchange at midday on Monday. On Nasdaq, they fell 5.6 percent to $55.47.

RIM has pushed aggressively into the broad consumer market to diversify its subscriber base beyond the executives, politicians and other professionals who use the BlackBerry to send wireless e-mail securely.

This consumer push has put it in direct competition with devices from Motorola, Nokia <NOK.N>, Palm <PALM.O> and Apple's <AAPL.O> popular iPhone.

Suva also downgraded Palm stock to "sell" from "hold" in his note. He said the company will not be taken over soon, despite investors' opinions to the contrary. He added that carrier promotional support for Palm's Pre smartphone is likely to weaken. The stock fell 4.1 percent to $11.13 on Nasdaq.

Last month, Apple reported it sold 7.4 million iPhones in its last quarter and it posted earnings that handily beat Wall Street forecasts, pushing its stock to record highs.

RIM, meanwhile, has stumbled. In September, it reported results and an outlook that disappointed investors and sent its shares tumbling more than 15 percent.

($1=$1.07 Canadian)

(Reporting by Wojtek Dabrowski; editing by Peter Galloway)

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