Many of the headlines you'll see today will note that phones based on Google's (Nasdaq: GOOG) Android operating system are now outselling Apple's (Nasdaq: AAPL) iPhone. But the real story behind the just-released Nielsen Co. report is how bad things are looking for Research In Motion (Nasdaq: RIMM) and its BlackBerry phones.
The BlackBerry OS is still tops in U.S. market share for all smartphones purchased in the first two quarters of 2010, at 33%. Android has nosed ahead of Apple, 27% to 23%. (It should be noted that iPhone 4 launched with just six days left in the second quarter.) Microsoft's (Nasdaq: MSFT) Windows Mobile is next at 11%, and no one else is above 3%.
The troubling news for RIM, however, is how likely its users are to switch to a competing OS. Among users likely to upgrade their devices, Nielsen says a stunning 57% of BlackBerry owners say they'd like to try something else. That compares to 29% for Android users, and just 11% for iPhone fanboys (and girlz).
If you're a RIM shareholder, remember that so much of the market is built on expectations, and if those expectations are dashed, things can get ugly. RIM is not going away anytime soon; it has a great balance sheet, lots of free cash flow, and has increased its revenue fivefold over the past three years. Its return on equity the past 12 months was an outstanding 35.7%.
But all that won't matter if what the Nielsen data are hinting at comes to pass. Most analysts are already factoring in declines in the user base, but should BlackBerry owners start defecting in droves over the coming year, you'll see a cascade of lowered estimates -- with a stock price following right along.
There's hope that the new OS 6 operating system, new slider phone, and even a tablet computer to compete with iPad -- all perhaps announced as early as tomorrow -- can help stem the tide. But the Nielsen data are a strong warning sign that should be taken seriously.
