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iPhone Breathing Down Blackberry's Neck

This wasn't the way it was supposed to play out. There was every indication that Research in Motion was supposed to be sitting pretty, effectively shaking off the effects of iPhone from Apple and still enjoying big time momentum in the marketplace.

Nope.

RIM Headquarters
Getty Images
RIM Headquarters

Research in Motion's fourth quarter numbers were a disappointment, to say the least, reporting $1.27, or a penny lower than consensus. That news came on the real big surprise here: $4.1 billion in revenue versus the $4.3 billion consensus. While new subscriptions were a nice surprise, at 4.9 million against the 4.6 million expected, unit shipments came in way, way light: 10.5 million Blackberrys shipped during the quarter when the Street was looking for something closer to 11.2 million.

Gross margin reached 45.7 percent versus the 43.5 percent expected. And as we look out to the company's first quarter, that's where the wheels come off this story. Sure, the revenue outlook came in as expected, with a range of $4.25 billion to $4.45 billion (consensus was at $4.3 billion); and new subs look good, with RIM expecting 4.9 million to 5.2 million (the Street range was 4.4 million to 4.8 million). But look at the gross margin outlook: RIM expects 44.5 percent, which is a decline from what the company saw in the fourth quarter.

That's a problem for RIM's bottom line.

In fact, some on the Street were looking for margins to remain stable or even increase thanks to new phones in RIM's pipeline that would help the company maintain some average selling price leverage. That appears to be deteriorating.

All of this wouldn't be nearly the problem it really is if Apple wasn't already seeing big momentum in iPhone sales. I suspect that when Apple reports in a few weeks, we'll see a healthy iPhone number. I'm guessing that RIM's Blackberry units shipped figure probably doesn't speak to a broader slowdown in smart phones, but I guess we'll see what company officials have to say on the conference call. If RIM is signaling a slowdown, it's obviously bad news for Apple, Google, Microsoft, Nokia, Palm, Motorola, and Samsung, and could send ripples through all of tech, including Qualcomm, Texas Instruments, Intel, AT&T, Verizon, Sprint. You name it.

But I'm not sure that's the real message here. It might very well be that RIM's problems are its own. Are some key phones in the pipeline delayed for some reason, as has happened before to this company? That seems far more likely than an unanticipated slowdown in tech's single hottest sector.

All that's interesting for the next several days.

But in the here and now, RIM shareholders are getting creamed. Shares took an almost instant 9 percent dive before recovering a bit. Longer term, I still think the wireless sector starts to settle down and consolidates behind a handful of today's top performers. RIM is certainly one of those. Unlike Apple though, which has multiple revenue streams addressing various sectors of tech, RIM is still a one-trick, Blackberry pony. At some point, not any time in the near future -- but at some point, that pony's gonna slowdown. Apple's the better play simply out of diversification and cash on the balance sheet.

But RIM's still got a long way to run.

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