RIM: The next month is critical with Blackberry sales mixed

Apple CEO Steve Jobs made it quite clear what company he wants to upend: Research in Motion. The next month will tell if RIM's response will be enough to silence the recently chatty Jobs. In fact, some analysts speculate that the next month will dictate RIM's performance in 2009 (and possibly beyond).

The issue: RIM is launching a bevy of devices--notably the Bold and Storm (right)--that will either fuel a product cycle that will launch the company into new markets. Or RIM will go for the brass ring and miss. There may be some wiggle room for an in-between performance, but RIM is clearly going for it. The big question: Will RIM's arsenal of devices catapult the company and Blackberry platform to the next level?

The answer will depend on how RIM manages channel relationships, gets cozy with carriers and delivers devices that folks want. Thus far, the results are mixed. Piper Jaffray analyst T. Michael Walkley said that RIM's October sales were mixed based on his channel checks. Walkley wrote in a research note Monday:

Our October checks indicate mixed RIM sales, as Curve sales remained strong at Verizon and Sprint but overall BlackBerry sales were softer than our expectations at AT&T and T-Mobile.

What's notable is that T-Mobile's G1 phone with Google may be poaching BlackBerry sales. Simply put, RIM needs to get its handsets into carriers and into customers' hands. At best, RIM is looking at a back loaded quarter.

In the meantime, RIM is laying the groundwork to garner some momentum.

To wit:

• Verizon Wireless is putting some marketing might behind the Storm by advertising during key NFL games. The message: The Storm is coming and Verizon has the exclusive. That Verizon messaging is relatively new given that the carrier rarely gets the good handsets first (Sprint, T-Mobile and AT&T usually lead). The Storm is probably viewed as a way to maintain Verizon's churn rates amid AT&T's iPhone-fueled momentum. Just for the record: I'll most likely get a Storm. Why? I'm a Verizon customer and they have a nice package where you can pay an extra $15 a month and turn your phone into a wireless card for your laptop. AT&T would require me to buy a card and a phone so the iPhone is a non-starter for me. Besides, I can get most of the iPhone fun I want with an iPod touch.
• RIM last week launched its "Application Storefront." In other words, RIM is aggregating its apps. Sound familiar? It is. Apple as hits App Store.
• And the company is becoming more developer friendly launching new tools that hook into Microsoft's Visual Studio, Eclipse and other platforms.

Add it up and you wind up with a nice showdown between RIM and Apple.

Last week, Jobs mentioned RIM seven times on Apple's earnings conference call. On the call, it almost seemed like Jobs borrowed the playbook from Oracle CEO Larry Ellison, who will mention an archenemy like SAP an average of 10 times a call. Every once in a while, Ellison will tee off on another rival like Red Hat. But generally, it's rare to mention a competitor by name that much.

Here's what Jobs said:

I would like to now highlight two remarkable milestones resulting from iPhone’s outstanding performance last quarter. The first is that Apple beat RIM. In their most recent quarter, Research in Motion, or RIM, reported selling 6.1 million BlackBerry devices. Compared to our most recent quarter sales of 6.9 million iPhones, Apple outsold RIM last quarter and this is a milestone for us. RIM is a good company that makes good products and so it is surprising that after only 15 months in the market, we could outsell them in any quarter.

But even more remarkable is this -- measured by revenues, Apple has become the world’s third-largest mobile phone supplier. I know this sounds crazy, but it’s true -- as measured in revenues, not units, Apple has become the third largest mobile phone supplier. Let’s look at the ranking -- Nokia is clearly number one at 12.7 billion; Samsung number two at 5.9 billion; Apple is number three at 4.6 billion; Sony Ericsson, number four at 4.2; LG, number five at 3.4 billion; Motorola, number six at 3.2; and RIM number seven at 2.1. Pretty amazing.

Now, both of these things, beating RIM in units and becoming the third largest mobile supplier in revenues are amazing feats but part of this was the result of expanding into over 50 countries and there’s no guarantee that sustained sales will equal initial sales. And who knows what the future results will be, given the worldwide economic slowdown but we actually outsold RIM last quarter and ranked as the third largest mobile phone supplier in revenues. Not bad for being in the market for only 15 months.

RIM and Apple are still very different, but each company is expanding on the other's turf. RIM started enterprise and went consumer. Apple is trying to do the opposite. Whether RIM manages to expand significantly beyond its current market share remains to be seen, but it's clear that RIM is entering a pivotal period.

Citi analyst Jim Suva said in a research note last week that RIM's fate is "increasingly binary." RIM will either succeed with its most ambitious product cycle to debate or it will fail. Suva wrote:

We see the next 30 - 45 days as a critical window for RIM products to reach carrier channels in time for holiday selling season, particularly as we see a rash of new products from all other major OEMs. In our view, investors are unsure if Bold will hit AT&T & if Storm will be at VZ (Verizon) in time/scale for holidays. We think RIM share outcome is increasingly binary – either a strongly positive near-term reaction to successful, timely launches, or further stock price declines if launch dates slip.

Our view is that the Bold and the Storm need to be launched at AT&T and Vodafone/Verizon, respectively, within the next 30- 45 days for RIM shares to see some relief...What remains to be seen is if RIM can successfully launch these critical new products in time for the holiday selling season, the outcome of which will be a major near-term share price driver, in our view. Longer term, investors need to gauge consumer uptake of these devices, the required subsidies/marketing spending to reach attractive price points and consumer adoption.

Suva also notes that RIM needs to hit its launch targets to build credibility. For instance, investors raised a few eyebrows as RIM outlined its outlook last quarter.

But more importantly, Suva has cooked up a decision tree for RIM. No pressure, but it illustrates the point. RIM has a busy month with some very high stakes involved. A few missteps and rest assured Apple will be yapping again and RIM will be explaining how its November quarter slipped away from it.

Here's Suva's probability tree (click to enlarge):

Bottom line: RIM future may ride on the success of its latest batch of products. It can't afford to have execution issues.