Zacks Analyst Blog Highlights: Research In Motion, Sprint Nextel, Marvell Technology Group, Adobe System and Target Corporation

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Jan 11, 2011, 10:25 ET

CHICAGO, Jan. 11, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Research In Motion Ltd. (Nasdaq: RIMM), Sprint Nextel Corp. (NYSE: S), Marvell Technology Group Inc. (Nasdaq: MRVL), Adobe System Inc (Nasdaq: ADBE) and Target Corporation (NYSE: TGT).

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Here are highlights from Monday's Analyst Blog:

Research In Motion Tablet in 1Q11

BlackBerry smartphone manufacturer Research In Motion Ltd. (Nasdaq: RIMM) will launch its much hyped PlayBook tablet in the first quarter of 2011. However, this will be WiFi only version. The 4G wireless network compatible PlayBook will be introduced in mid-2011 for the 4G networks of Sprint Nextel Corp. (NYSE: S).

The tablet computer is being built by Quanta Computer Inc of Taiwan and will run on chips from Marvell Technology Group Inc. (Nasdaq: MRVL). The tablet will be based on a new operating system developed by QNX Software Systems. Research In Motion acquired QNX from Harman International in April 2010.

The company is using the operating system from ONX instead of its traditional BlackBerry's operating system, which is slow, time consuming and outdated. Eventually, Research In Motion intends to transform its BlackBerry smartphones to this improved operating system.

The tablet will include a video camera and Adobe System Inc's (Nasdaq: ADBE) Flash software. It will support Bluetooth and broadband connections that will allow connectivity to cellular networks through a Blackberry smartphone. PlayBook is mainly designed for enterprises, which use special servers to control and monitor employees' BlackBerry phones.

We believe diversification in the tablet market is necessary for Research In Motion. The company is still reeling under an extremely challenging environment, reflected in its soft net BlackBerry subscriber growth. During the third quarter of fiscal 2011, the company added 5.1 million net new subscribers, which is at the low-end of its guidance.

Furthermore, management has decided not to disclose this figure and ASP (average selling price). We remain highly skeptical about this announcement. Unlike other mobile phone manufacturers, net subscriber addition is directly linked to the company's Service revenue, which accounts for nearly 17% of its total revenue.

We suspect the company may fumble in North America due to increasing pressure from iPhone and several Android-based smartphones. We maintain our long-term Neutral recommendation on Research In Motion and currently a short-term Zacks #3 Rank (Hold) on the stock.

Target Loses Momentum

Target Corporation (NYSE: TGT), the operator of general merchandise and food discount stores in the United States, recently posted lower-than-expected sales results for the five-week period ended January 1, 2011.

The company lost momentum as is evident from the comparable-store sales results for December 2010 that rose marginally by 0.9%, following an increase of 5.5% in November 2010 and reflecting a drop from an increase of 1.8% witnessed in December 2009.

The slight increase in comps was the result of growth in average transaction size with a modest rise in comparable store transactions.

By category – grocery, apparel and healthcare and beauty reported healthy sales results. However, hardlines sales fell with sluggish performance experienced across electronics, toys, sporting goods, music, movies and books. Comparable-store sales of home decor remained soft.

Year-to-date, comparable-store sales climbed 2.1% compared with a fall of 2.7% in the same period last year. Based in Minneapolis, Minnesota, Target said that net retail sales for December rose 1.4% year-on-year to $9,882 million, whereas year-to-date, sales climbed 3.8% to $61,404 million.

Management now expects a low- to mid-single-digit increase in comparable-store sales for January. Target said that consumers are responding well to REDcard Rewards program that offers 5% discount on payment through Target Credit Card, Target Visa or Target Debit Card.

Target hinted that it remains well positioned to achieve its fourth-quarter 2010 sales and profitability goal. The company at its third quarter earnings announcement notified that it expects the fourth quarter comps to rise between 2% and 4%.

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