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Struggling smartphone manufacturer Research in Motion Limited has signed a licensing deal with the world’s largest software manufacturer Microsoft Corporation (MSFT - Analyst Report) that will allow its customers to store and transfer larger files more easily.

RIMM will use Microsoft’s Extended File Allocation Table or exFAT, which facilitates clear viewing and expansion of larger files like high resolution photos and videos. Additionally this latest technology will also provide a seamless data transferability and easy file exchange features between desktop PCs and other electronic devices. 

The latest smartphone and tablets require superior viewing capacity to display high resolution photos and videos than traditional feature phones. According to the innovator of the technology, the new exFAT is a considerable improvement over the older FAT system, and can support five times larger files than its predecessors. Microsoft has similar agreements with electronic goods manufacturer Panasonic Corporation Sony Corporation (SNE - Snapshot Report) and Canon Inc (CAJ - Snapshot Report).     

Research in Motion is facing severe problems due to an increasingly competitive landscape, primarily from Apple Inc.’s (AAPL - Analyst Report) iPhone and an array of other smartphone manufacturers running on Google Inc.’s Android platform.  Lack of applications in its legacy handsets mainly contributed to Research in Motion's huge market share loss in the high-end smartphone segment.

The Waterloo, Ontario-based company is betting on its new Blackberry 10 OS-based devices, which are slated to release in the first half of 2013, may act as a potential game changer for Research in Motion. At present, as customers are preferring their phones over PCs and laptops to exchange data and videos we believe this patent deal will offer a value added service for its latest offering and will cater to the specific needs of the Blackberry users.

The current Zacks Consensus Estimate for Research in Motion is pegged at a loss of 46 cents for the fiscal second quarter 2013 with a growth rate estimate of (157.34%). For fiscal 2013, the Zacks Consensus Estimate stands at a loss of $1.49 with a growth rate of (135.42%) and for fiscal 2014 the Zacks Consensus Estimate stands at a loss of 73 cents with a growth rate of 51.02%.

Recommendation:

We, maintain our long-term Neutral recommendation on Research in Motion. Currently, RIMM has a Zacks #4 Rank, implying a Sell rating over the short term.

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