Apple owned the spotlight yesterday with its iPod event in San Francisco, but today and tomorrow it will all be about Research in Motion, with CEO Jim Balsillie preparing to keynote the big CTIA Wireless expo Thursday, which comes a week before the company issues its quarterly earnings.
RIM has been all over the map these last several weeks, with Wall Street analysts trying to get a handle on whether momentum is merely napping, or whether it's on life support. Just this week alone, Morgan Keegan upgrade RIM from market perform to outperform, mostly on valuation.
A day later, Canaccord Adams cut its estimates on RIM by 18 percent, pointing to the possibility of a business spending slowdown which could hit the company. This was a $133 stock just a few weeks ago; yesterday it dipped below $100 a share. It's up about 4 percent today, but still: It's clear that investors are getting squeamish, despite a 19 P/E, and so many indications that the company still owns the smart phone market, according to Gartner, which earlier this week said RIM's share jumped from 8.8 percent o 17.4 percent in just a year's time. Though the overall smart phone market grew by only 16 percent last quarter.
That's the good news. But there are deeper, more systemic issues facing this company. RIM unveiled the new Pearl 8220 Flip, an intriguing handset aimed squarely at consumers, where pricing is going to be key. RIM will have to answer the cheap, but highly capable Centro from Palm; and the ever-falling prices of Apple's iPhone. Is the Flip its answer, because the company really does need an answer.
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When the BlackBerry Bold comes to the US, it'll likely carry a $299 price point. With the iPhone at $199, the Samsung Instinct at $129, and that Centro for $99 or less, what makes RIM so sure it can hawk a $299 phone. The same question could be posed to Palm as it tries to sell its new, unlocked Treo for $549, but remember that device is targeted at business users who might pay a premium to pick their own carrier and not have to shell out big bucks for roaming charges. RIM won't have that same kind of luxury.
A few other key issues: the new Flip is four-band EDGE device on the AT&T network. There's a non-3G version of Bold coming. Why does RIM seem so slow in migrating to 3G? Maybe that's more perception than reality, but it's the perception nonetheless. Also, after the Apple event yesterday, RIM has some work to do in selling the Blackberry as a handheld multi-media device. Customers have downloaded and bought a stunning number of third party applications from the AppleApp Store these last 60 days. Apple is using the market itself to expand the iPhone market in a grassroots kind of way we really haven't seen before. What kind of threat does RIM feel from that? Apple's got Electronic Arts, Sega and many other key developers creating compelling content specifically for iPhone. Does RIM feel any pressure to develop and cultivate similar development programs?
Then of course, you have Google'sAndroid mobile operating system coming to a new handset from HTC in the next several weeks.
Individually, these challenges are, well, challenging enough. But put 'em all together, and RIM's facing deep and steep competition from a number of fronts. Simultaneously. Such is the scenario for a market leader like RIM. The company's product pipeline has never been this stuffed: the Bold in the US, the Flip, a new touch-screen, a slider, an upcoming 3G version of Pearl. No question RIM has challenges, but it's got the weapons in its arsenal to fend off so much of this "competition." This company has proven how well it can innovate and execute. Earnings next week will be telling, but this might be a case of a stock price simply, but dramatically, underestimating the true opportunities ahead for this company.
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