Can RIM keep up with Apple and Android?

Research in Motion reports its fiscal third quarter results Thursday and the big question will be: Can RIM keep up?

Financially, RIM's third quarter will be solid on the surface. Wall Street is expecting earnings of $1.04 a share on revenue of $3.78 billion. Gross margins are expected to be 43 percent. For the fourth quarter, RIM is currently expected to report earnings of $1.19 a share on revenue of $4.24 billion.

But under the cover there are some real worries. Among them:

• Average selling prices. RIM has been using "buy one, get one free" promotions in recent quarters. The aggressive campaign may keep share, but it's a worry to analysts. Piper Jaffray analyst T. Michael Walkley notes that BlackBerry's lower priced phones are the hot sellers. As a result, RIM's profit margins may get pinched in the February quarter.
• What can RIM do to keep up or leapfrog Apple's iPhone and the Android handset army, which is dominating carrier roadmaps in 2010?
• Can RIM defend the enterprise? Job losses, weak IT spending and iPhone encroachment are all problem areas.
• What's the software plan? RIM's operating system is looking dated. Sure, RIM has acquired Torch Mobile to improve its Web browser, but the company is trailing on the mobile app front. Indeed, analysts say Motorola's Droid is gaining share on RIM in Verizon accounts.

Caris & Co. analyst Robert Cihra lays out the landscape.

iPhone/Android competition is real and RIMM needs to keep pushing its software development further/faster beyond core messaging...Our own fieldwork shows iPhone starting to have a real impact in enterprise IT accounts and especially their “future plans,” with PUSH from Apple sales but also now carriers’ own enterprise/biz accounts teams and third-party software/integrators, catalyzed by simultaneous PULL coming from customers.

And Cihra is relatively upbeat about RIM's prospects. He expects IT spending to improve, a strong refresh cycle and international sales as big opportunities for RIM. In addition, BlackBerries still represent just 3 percent of mobile phones so could see upside.

Other analysts see a lot of challenges ahead. The biggest issue: RIM is in an increasingly competitive space and will see market share and pricing problems ahead. Without innovation, RIM could wind up playing a lot of defense and become a commodity player.

Phil Cusick, an analyst at Macquarie Research, said in a research note:

In 2010 we expect RIM's developed market consumer smartphone share to see continued challenges from players like Motorola, Palm and Apple, as iPhone exclusivity fades, and to hear increasingly about Nokia's consumer email solution pressuring RIM's growth in Europe and Asia.

The elephant on RIM's conference call will be competition and how the company plans to address it.

Related:

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• Analyst: Big on Motorola, Android; no love for RIM, Palm
• With BlackBerry Storm2, RIM wins the battle but loses the smartphone war [review]
• The Android army: Verizon Wireless, Google ink collaboration pact; Google Voice support on tap
• Podcast: Is $99 the new $199 for smartphones?
• Revisiting RIM: Are the enterprise storm clouds brewing?
• RIM signals price war potential; Fallout could be substantial