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Rampant speculation surrounding Research in Motion Ltd. stock and the success of its new BlackBerry 10 phones is getting silly. Every new analyst note seems to bring fresh reasons to love or hate the stock based on little more than vapour. All that steam is of no help to anyone who's actually serious about owning the stock. But this Thursday's fourth quarter earnings report won't be much help either. The really important indicator about RIM's future is at least one quarter away.
Investors are used to the "buy on speculation, sell on news" phenomenon that afflicts RIM and other tech companies around product launches. That has been exacerbated since the Jan. 31 global launch (excluding the U.S. – more on that below) of the BlackBerry 10 by conflicting reports. Reviewers were glowingly positive – but worried Samsung's new devices would steal its thunder. RIM stock rose on news of an order of one million units – but that was hardly earth-shattering given the company shipped 6.9 million smartphones last quarter. Now it's down, after an analyst declared that AT&T's launch of the Blackberry touchscreen Z10 was a bust – all of one business day after it went on sale.
So why won't this Thursday's numbers add clarity? Two reasons. The quarter ended March 2, three weeks before the company's Z10 launch in the U.S.
But even assessing the U.S. success of the Z10 as a proxy for RIM's overall prospects is hazardous. As Byron Capital Markets analyst Tom Astle pointed out recently, the key customer group to watch is existing BlackBerry customers, and most of them are waiting for the Q10 device, which, unlike the Z10, comes with BlackBerry's traditional keyboard (Sprint is only carrying the Q10). That won't be out in the U.S. for about another month – halfway into the first quarter, and Mr. Astle estimates this group will buy up to 14 million units, just over a third of potential sales, in the year. He figures first-time smartphone users globally will account for another 16 million units, good for a 4 per cent market share, equal to RIM's current position, and assumes another seven million units will be sold to existing BlackBerry users in emerging markets.
That leaves a group Mr. Astle classifies as former BlackBerry users, customers who abandoned their aging BlackBerry models for touchscreen Apple or Samsung products in recent years. If the Z10 is to earn its keep, it is by convincing these people to switch back. But even in a best-case scenario, he pegs sales to this group at just four million phones – just 10 per cent of RIM's total smartphone sales. That's a relief, because this group could prove to be a hard sell in a crowded market of established rival products from industry giants Apple and Samsung. That might explain why AT&T's launch appears at first blush to be so muted, and perhaps why the U.S. launch was delayed in the first place: RIM barely resonates with consumers, and U.S. phone companies had bigger fish to fry.
But we don't want to add to the noise. Trading in RIM stock remains the sport of extreme speculators. True believers and skeptics alike should wait a quarter – and focus on Q10 sales – before making their call.
Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.
Sean Silcoff