September 27, 2009

Rivals May Challenge RIM For Market Share

Research in Motion Ltd., maker of the popular BlackBerry smartphone, could see its market share decline as a result of competitive pressure from rival devices such as Apple Inc.'s iPhone, according to a Reuters report citing analysts' warnings on Friday as shares of RIM's stock plummeted 17 percent.

The sharp decline followed RIM's earnings report on Thursday after the markets had closed, when the company posted disappointing profits and scaled back its future outlook.

The analysts questioned whether RIM would be able to maintain its market share as it fights an increasingly fierce battle for retail and corporate customers.

Such concerns initially surfaced ahead of the iPhone's launch during the summer of 2007, although RIM said it would not be affected.  Indeed, the company continued to post solid subscriber gains and launched its touchscreen-based BlackBerry Storm, its rival to the iPhone, in late 2008.

RIM's latest profit and outlook report has analysts again doubting whether the company will be able to maintain its success.

"RIM is unlikely to maintain its over 50 percent share in North America in the face of increasing competition from Apple, Motorola, and Palm, among others," Reuters quoted Goldman Sachs analyst Simona Jankowski as saying.

"Even in a still-benign competitive environment and with two newly launched products, RIM lost share for the second consecutive quarter."
Goldman also cut its rating on the RIM's stock from "buy" to "neutral".

RIM's large distribution network is partially responsible for the company's strength in the smartphone market.  Both retail and corporate customers can purchase the BlackBerry from more than 500 carriers and distribution partners in some 170 countries.

However, the Waterloo, Ontario-based RIM could find itself battling for previously uncontested turf as the iPhone and other rival devices extend their reach.

In Canada, for example, the iPhone is currently available only from Rogers Communications.   But Canada's other major carriers -- BCE Inc and Telus Corp -- are collaborating on a network upgrade that could allow them to offer the iPhone as early as next year.  All three carriers offer the BlackBerry today.

Historically, RIM has reported strong growth outside North America, but this might be stalling, Jankowski cautioned.

"A second consecutive decline in international sales tempers our expectations for share gains overseas," wrote the Goldman analyst.

Brokerage firm Raymond James also cut its rating on RIM from "outperform" to "market perform".   Meanwhile, UBS analyst Phillip Huang held a "neutral" rating on RIM, Reuters reported.

"Sentiment could be muted near-term due to increasing competition (and) a potential relationship between Apple and Verizon Wireless," Huang said.

But some analysts remain bullish on RIM despite the company's latest results.

Peter Misek of Canaccord Adams said the stock still has upside potential, despite the latest results.  He repeated his "buy" rating, citing a $110 per share target.

"We maintain our long-term positive outlook on the stock, particularly with a series of impressive new product launches on the horizon," he wrote in a note to clients.

Shares of RIM's stock were down 17 percent on Friday, closing at $68.91 on the Nasdaq.


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