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RIM Looks Like Research In Slow Motion

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BlackBerry smartphone maker Research In Motion (Nasdaq: RIMM  ) , in an attempt to turn around all the negativity surrounding it, unveiled a fabulous array of its Bold series smartphones. But in a not-so-bold move, the company also lowered its financial guidance last week. What are Fools to think?

The story so far
I think Research In Motion's woes have only just begun. As competition from other smartphone makers intensifies, RIM has witnessed a constant decline in its market share. According to researcher Kantar, U.S. market share plummeted all the way down to 10.5% in March this year compared to 32.5% in June 2010. That's a steep departure from comScore estimates that place RIM's share of U.S. smartphone subscribers at 27.1% in the first quarter. However, the trend from all researchers is one of rapidly declining market share.

That news is making its way to the bottom line -- fast. Last week, the company said it now sees first-quarter earnings of $1.30 to $1.37 per share, well below its initial forecast of $1.47 to $1.55. Even as the pressure on RIM mounts, rivals are not letting up on the battle for market share.

The smartphone market is rapidly growing, and players such as Apple (Nasdaq: AAPL  ) have already staked their claim with devices such as the iPhone. There are also Google (Nasdaq: GOOG  ) Android-supported smartphones that are accelerating in pace.

The BlackBerry PlayBook tablet was launched with QNX operating system last month, and this is the same operating system that RIM plans to include in the smartphones that it will unveil next year. But even with improved technologies aimed at better competing with the iPhone and Android models, the current playing field for RIM does not really look conducive to its optimistic future plans.

Future plans
A series of new BlackBerry smartphones that are going to hit the market are being touted as "super phones" by the company. Plans of releasing these phones armed with the QNX operating system have been blowing about in the wind for a long time. However, the revamped Bold lineup Research In Motion unveiled will lean on BlackBerry OS 7, the next iteration of RIM's operating system, which has been derided for not keeping up with the slick user interfaces and software found on Apple and Android phones.

With the PlayBook, RIM hit the massively popular and rapidly growing tablet PC market. The reviews have been mixed, but its release is important because it is RIM's most direct attempt at creating a new interface comparable to both the iPhone and Android.

Fool's take
In the end, BlackBerry users are rapidly shifting to other smartphones instead of waiting for the better "super phones" to hit shelves. Remaining BlackBerry users are often turning to lower-priced consumer-oriented phones, which pressures phone selling prices and company margins.

Until the company can complete its transition to new QNX-based "super phones," RIM will continue fighting against changing customer loyalty in coming quarters in order to meet the full-year forecast. RIM still believes it can achieve earnings per share of $7.50 this year.

While all that is good news for people who are waiting for RIM to do well, there is no guarantee this move will help RIM's cause. The $7.50 per share earnings is a long way away. If you're a RIM investor, the company might be starting to look like a strong value play, but there's little to stem the Android assault in coming months. And as RIM keeps seeing delays on revamped products, the smartphone market keeps drifting away from the company.

To stay updated on all things Research In Motion, add the company to our free watchlist service today:

Arunava De does not own shares of the companies mentioned in the article. Google is a Motley Fool Inside Value pick and a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a bull call spread position on Apple. The Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (28)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 13, 2011, at 9:48 PM, cbglobal wrote:

    RIM is a foreign (non USA) company that does over two thirds of its business outside the USA.

    They have the most competition in the US, but are still growing. They are growing rapidly and still gaining market share on the rest of the planet where people cannot afford unlimited iPhone/Android data plans like spoiled Americans can.

    Funny how your ego makes you only look at local USA data and think the whole world revolved around the USA. It doesn't.

    The name of this wesite use to be cute. Now it has ironically become as completely factual description of the website itself.

  • Report this Comment On May 14, 2011, at 1:31 AM, DefunctAcct wrote:

    So RIM is growing and they are gaining market share but then at the same time, they cut guidance drastically and the Co-CEO admitted to BB being an "aging" product.

    So which is it? Is it selling like hot cakes and gaining market share and shoveling piles of revenue into RIM's pocket? Resulting in rising and growing earning per share? Or is it losing market share, suffering from depressing margins, and thus a possible drop in revenue resulting in the need to cut guidance?

    I do not see how it can be both?

  • Report this Comment On May 14, 2011, at 2:42 AM, gslusher wrote:


    "RIM is a foreign (non USA) company that does over two thirds of its business outside the USA."

    Apple is an US company that does about the same amount of business outside the Americas, according to their latest data. Apple has said that about 70% of iPhones are sold outside the US.

    "They are growing rapidly and still gaining market share on the rest of the planet where people cannot afford unlimited iPhone/Android data plans like spoiled Americans can."

    Some problems with that.

    1. RIM is losing global market share. Apple recently passed RIM as the #2 global smartphone maker after Nokia and became the #4 selling maker of all cellphones, after Nokia, Samsung and LG.Samsung is biting at RIM's heels in smartphone sales.

    2. Sales in the markets you mention are mostly lower priced phones, with lower margins., while RIM is losing share of the upper-end, higher margin, market to Apple and the better Android phones. That doesn't help RIM's bottom line very much. Apple apparently makes more profit from the iPhone than ALL other major smartphone manufacturers combined--and has for several quarters. (That doesn't count other iOS devices--iPad, iPod touch.)

    3. RIM is facing increased competition from indigenous (or at least nearby) manufacturers in China, India, Southeast Asia, etc Making the hardware is fairly easy and cheap, especially for "not-so-smartphones," basically upgraded feature phones with email. These may be powered by forks of Android that are NOT controlled by Google being used by Chinese manufacturers, for example.

  • Report this Comment On May 14, 2011, at 1:24 PM, powerphrase wrote:

    All rimm haters did you tried blackberry playbook? you should, Your death wish for rimm will remain a dream. Bold 9900 will recapture rimm d

    ominant position again. No doubt about it.

  • Report this Comment On May 14, 2011, at 5:22 PM, Riskysam wrote:

    Saw this coming 8 months ago as Rimm shares were ridiculously bided up. I'll buy more options on this sucker

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