Hudson Square Research made an unpopular move on Monday by upgrading shares of Research In Motionto a “buy” rating.
A few days after RIM’s dire earnings report, it’s on the defensive.
“We’re not doing this because we’re waiting for BlackBerry 10 to turn the business around,” says Daniel Ernst, technology analyst for Hudson Square Research.
Instead, Ernst is betting the embattled company will sell some of its business divisions, even if it holds onto its smartphones.
“At a $1.6 billion enterprise value, there’s just too much potential opportunity to unlock there,” Ernst told CNBC’s “Squawk on the Street.”
Despite last quarter’s sharp drop in BlackBerry shipmentsand subsequent staff cuts, Ernst says the company still has a global network with a $2 billion book value and 78 million service subscribers.
These factors, he says, make $1.6 billion a “digestible figure” for large players who want market share in mobile.
Who might buy? A few names come to his mind. “It’s an opportunity for someone like Microsoftto go in and sell exchange servers at the carrier level. Google could also do that,” said Ernst.
That said, a “buy” rating on RIM is still considered left-field by most of the Street — and Ernst is humble about it. “Any number of things could go wrong with this call,” he conceded. “I’ve been both right and wrong on this stock in the past.”
If he’s not certain what will happen, Ernst throws his certainty behind what he thinks should happen.
“First and foremost, has their board realized that they really need this? If you look at recent history of aHewlett-Packard or aNokia — assets can always get cheaper,” he said. “So this is probably now or never for RIM. The market clearly doesn’t have time to wait.”
—By CNBC’s Jennifer Leigh Parker
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Daniel Ernst does not personally own shares in RIMM, nor does his firm, Hudson Square Research.
Follow Jennifer Leigh Parker on Twitter @jparker741.