RIM earnings: International sales to shine, but Blackberry losing grip in U.S.

Research in Motion's quarter will be the tale of two companies. One one side international BlackBerry sales are surging. But in North America, analysts are worried that the company is losing its market share grip.

Research in Motion delivers its fiscal first quarter results Thursday and the consensus view is that international sales should keep the company humming even though it faces stiff competition---and market share erosion---in North America.

Overall, the company is expected to deliver a quarter in line with Wall Street estimates. Analysts are expecting earnings of $1.34 a share on revenue of $4.36 billion.

However, the quarter should highlight a tale of two RIMs.

The first side of RIM is propelled by international sales. Latin America, Europe, India and Asia have been strong for RIM. Indeed, Nokia's profit warning is due to Apple and RIM competition as well as Samsung. Going forward RIM will do as well as its international sales.

Susquehanna Financial analyst Jeffrey Fidacaro says in a research note:

The positives for RIM are the potential for increased international market share as the company strategically attacks the low-end smartphone market and pre-paid emerging markets with innovative messaging plans (negative for Nokia), and we believe RIM will be a net beneficiary of tiered data pricing.

The other side of RIM is the business in North America. Here RIM needs to show some new products. Analysts expect new BlackBerry OS 6 devices in the third quarter and RIM really needs something to keep up with the Androids and Apples.

In other words, RIM's quarterly results will largely depend on what executives say about the outlook for the next quarter as well as the new product cycle ahead. Can RIM really keep up with Apple and Android?

"Given the increasing competitive landscape from the iPhone and Android platforms, along with the prospect of Apple’s iPhone potentially coming to Verizon in early CY11, we have near-term concerns on ASPs, gross margin, and an expected slowdown in year-over-year growth, which could result in downward EPS revisions absent operating leverage," says Fidacaro.

Gallery:

Latest BlackBerry devices (photos)

William Blair analyst Anil Doradla reckons that RIM is already losing share at carriers in North America. Doradla writes:

Since our checks began a couple of years ago, this is the first time that an individual RIM device did not make it as a best-selling device across all four major North American mobile operators (AT&T, Verizon, Sprint, and T-Mobile). At AT&T, Verizon and Sprint, we believe BlackBerry Bold was the second best-selling smartphone, while at T-Mobile the Bold was the third best-selling smartphone. Bottom line, slowly but steadily, our checks clearly indicate a pattern in which RIM is losing its grip in the North American smartphone market.

Add it up and you have a lot of happy talk about international strength and some real concerns about North America. Analysts appear to be much more concerned about RIM's answer to growing competition in North America from the likes of Apple, HTC and Samsung. Based on the numbers, RIM's international strength should offset any perceived weakness in North America.

Here's the crib sheet for RIM's quarter:

  • Units: Fidacaro sees RIM shipping 11.3 million devices in the quarter. Consensus estimates are a bit higher at 11.5 million.
  • Average selling prices: Wall Street is expecting an ASP of $306 for devices.
  • Enterprise demand: Remember that enterprise IT spending is bouncing back and mobility is a big focus area. RIM has a lock on the mobile enterprise and should benefit.
  • Gross margins: Wall Street is expecting gross margins of 44.41 percent.
  • The outlook: Analysts are expecting earnings of 1.30 a share on revenue of $4.5 billion for RIM's August quarter.

Related: RIM's new phone and tablet: Can they fend off Apple, Android?

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