John Paczkowski

Recent Posts by John Paczkowski

RIM’s BlackBerry Jam

blackberry_squeezeResearch in Motion’s disappointing fourth-quarter results have inspired a somber mood today among analysts who follow the company.

Seems news of the RIM’s (RIMM) lower phone shipments has compounded fears that it is losing ground to Apple’s (AAPL) iPhone and the conga line of new Android handsets that have debuted recently.

Simona Jankowski of Goldman Sachs (GS) took a particularly dim view of Research in Motion’s performance, suggesting that there may be grave reasons for the decline in phone shipments RIM suffered during the quarter (the company shipped 10.5 million devices; analysts were looking for 11 million).

“Evidence [suggests] that the structural competitive issues are starting to weigh on its growth prospects,” Jankowski wrote. “We estimate that RIM’s U.S. business declined 15% [quarter-over-quarter]–the second q-o-q decline in a row, and the first [year-over-year] decline.”

Jankowski questions the official Research in Motion explanation. “While RIM attributed that to an inventory reduction at a North America customer, we think the magnitude of the decline points more to lower demand at Verizon as a result of its endorsement of Android; our checks showed a dramatic reduction in the number of RIM [phones] at Verizon last quarter and better sales for Motorola’s DROID than for RIM at many Verizon stores.”

The implication here is that RIM’s BlackBerry devices are losing their appeal as the market becomes more enamored of super-smartphones. While RIM may hold the lead in email-based smartphones, it’s not worth much as the market’s focus shifts to smartphones with vast application ecosystems.

As Charter Equity Research analyst Ed Snyder observed in a note to clients this morning, “Weak offerings in [touchscreen phones] and 3G leave [RIM] heavily exposed to a slew of new smartphones now hitting the market. While it will certainly maintain its lead in email-based smartphones, we see little chance it can sustain its market share, pricing or margins long-term.”

In other words, RIM needs a new phone–a competitive phone. Desperately. Thankfully, company co-CEO Jim Balsillie says one is on the way. “I can’t talk about what’s not announced,” he said on an earnings call with analysts Wednesday. “If you saw the road map, you’d be blown away.”

I certainly hope so. Because without a worthy rival to the iPhone, Droid, Nexus One, et al, things will only grow worse, particularly if that CDMA iPhone rumored to be on its way to Verizon materializes. Said Citigroup (C) analyst Jim Suva: “We simply don’t want to be owners of RIM shares when Verizon gets the iPhone.”


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