RIM Shrouded by Uncertainty Ahead of BlackBerry World

By Clint Boulton  |  Posted 2011-05-01

RIM Shrouded by Uncertainty Ahead of BlackBerry World

There's no shortage of negative sentiment heading into Research In Motion's BlackBerry World conference, which officially kicks off in Orlando, Fla., May 3.

Fortunately for the challenged BlackBerry maker, the show is for developers and not investors or financial analysts, who would undoubtedly roast leadership for just its performance in the last two weeks alone.

First, the long-anticipated and much-hyped BlackBerry PlayBook launched April 19 and was largely panned by critics who feel the latest Apple iPad challenger was missing core pieces.

Analysts and reviewers were shocked into mourning by a BlackBerry-branded device that didn't natively support email, the brand's hallmark, though Jefferies & Co. analyst Peter Misek said it may have sold 45,000 units on launch day.

Second, RIM on April 28 cut its sales and profit forecasts for the first quarter. The company pared per-share earnings from $1.47 to $1.55 to $1.30 to $1.37 for the first quarter and lowered Q1 guidance below its previously stated $5.2 billion to $5.6 billion range.

The company also said BlackBerry smartphone shipments will likely be toward the lower end of the 13.5 million to 14.5 million unit guidance that it forecast in March.

During a conference call with analysts April 28, RIM co-CEO Jim Balsillie attributed the cuts to the aging of RIM's high-end BlackBerry devices, such as the Bold and Storm.

A glance at smartphone calculations from comScore, Nielsen and NPD Group make it clear the speedy Android smartphone cycle and the Verizon Wireless iPhone 4 dinged RIM's smartphone sales in the last several months. NPD said RIM's mobile phone share dropped 5 points to 14 percent in Q1.

Worse, new smartphones based on BlackBerry OS 6.1 are not expected until second quarter of 2012. Moreover, smartphones based on RIM's newfangled QNX operating system, which powers the PlayBook, are not expected to be hit the market until early to mid-2012.

"This has left a void in its portfolio and led to substantial weakness in North America, particularly in the U.S. and Latin America," Susquehanna Research analyst Jeffrey Fidacaro said in a research note April 29.

Analysts had a number of takes about these developments, few of them positive. Fidacaro lowered his RIM FY12/FY13 revenue range from $23.7 billion to $25.7 billion to $22.5 billion to $23.7 billion and EPS from $6.49 to $6.80 to $6.07 to $6.21.

RIM Hurt by Aging Smartphones, New Product Delays

Caris and Co.'s Robert Cihra said he shaved a penny off of his FY12 EPS estimate to $6.70, which is still well short of RIM's reaffirmed guidance of $7.50 for the full fiscal year.

While he expects BlackBerry refreshes starting this summer, such as the Bold Touch, Torch 2 and multiple new Curves, he's concerned that RIM will not launch QNX-based, dual-core smartphones until early 2012.

This "makes us question how excited users/carriers may be for this year's evolutionary OS 6.1 vs. waiting for the complete (and architecturally overdue) QNX-scaled re-write," Cihra added. 

Gleacher & Co.'s Stephen Patel wrote in his research note that while RIM's PlayBook and other forthcoming phones look compelling from a hardware perspective and also include substantial OS upgrades, he does not believe the company can address its ecosystem shortcomings in applications with the same ease.

"The QNX-based smartphones will be able to run Android applications, but this functionality will not be available on Blackberry 7.0. As consumers increasingly desire applications, the risk increases that RIM's UI and hardware improvements will not be enough to narrow the gap vs. Android and iPhone," Patel said.

"Investors will remain skeptical until we see very tangible evidence that RIM can stabilize its market share and participate in smartphone industry growth," he concluded.

Which leads us to our raft of speculation about RIM's roadmap heading into BlackBerry World. The majority of analysts expect to see BlackBerry OS 6.1 on existing or even prototypes of forthcoming devices, a lot of PlayBook demos and early versions of the company's Android and Java app players.

To wit, Balsillie waxed enthusiastic about RIM's roadmap on the earnings shortfall call with analysts:

"As we've said before we feel great about the BlackBerry platform and the PlayBook and how they're doing. We just need to have some newer, higher-end products in the market... This is a transition. We're cutting over to a whole new platform and whole new set of products and it's very powerful and we're very excited about their long-term strength and the long term strength of the company. We'll have a very exciting BlackBerry World next week."

Still, only a company drunk with the mother of all hubris cocktails could announce such dire news and walk confidently into a developers' conference to discuss its roadmap going forward. 


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