Research In Motion Ltd.'s BlackBerry sales might be even worse than expected and the Waterloo, Ont.-based technology giant is at risk of dipping below 5 per cent global market share in the smartphone space it helped create years ago, according to an RBC Dominion Securities analyst.
RBC's Mark Sue said in a research note issued Monday that he expects RIM to ship roughly 9.5-million BlackBerrys in the quarter, well below consensus estimates of 10.5-million BlackBerrys and the 11.1-million BlackBerrys that RIM shipped in the fourth quarter. RIM, when it announced fourth quarter earnings on March 29th, said the increasingly volatile situation the company faces in the market means it can no longer issue guidance to the market.
Because of slowing sales for RIM's current legacy products in the marketplace, which the company must continue to sell before a new operating system comes out later this year, Mr. Sue reiterated his $13 price target on RIM while lowering his rating to "sector perform - speculative risk" from "sector perform - above average risk." Though pointing out that RIM had no debt, Mr. Sue warned that RIM's diminishing global scale, and price-slashing in the face of rivals' more attractive products, means RIM could start to burn through cash -- a situation similar to what Nokia Corp. is now facing as it attempts a turnaround with high-end devices running Microsoft Corp.'s Windows Phone software.
This week RIM kicks off its BlackBerry World conference in Orlando, Florida, where the company will issue third-party software developers with prototype phones running a beta version of the BlackBerry 10 operating system -- software the company is betting on for a turnaround. RIM's new CEO, Thorsten Heins, will address the conference on Tuesday.
In Mr. Sue's view, RIM's shares aren't currently trading on the company's fundamentals, but on the potential for value created through potential strategic shifts the company discussed on the last earnings call, such as content partnerships, software licensing opportunities, joint ventures and other strategic opportunities. Mr. Sue took over duties for covering RIM at RBC when long-time RIM-watcher Mike Abramsky left the company about one month ago.
Over the past year, activist shareholders and critics have advocated that RIM break apart or sell the company, given the huge market share losses and relatively noncompetitive product portfolio. Though Mr. Heins has not ruled out selling the company, when asked, he has maintained that RIM's main advantage is as an integrated company that combines RIM's two main areas, handsets and wireless services through the company's unique, secure global network.
Helping pad the company's coffers through the turmoil, RIM is still seeing huge growth in the Middle East and Africa, as well as in particular high-growth markets such as Brazil and Indonesia. Though these markets are seeing an influx of cheaper devices made by Chinese manufacturers and running Google Inc.'s Android operating system, RIM still has around 60 per cent or higher of the smartphone market in many of these countries, a far cry from its position in North America.