RIM worries mount: Will its quarter get Torched?

Research in Motion's second quarter results land Thursday and analysts are fretting that the launch of the Torch, the flagship BlackBerry, has been disappointing.
Written by Larry Dignan, Contributor

Research in Motion's second quarter results land Thursday and analysts are fretting that the launch of the Torch, the flagship BlackBerry, has been disappointing.

Simply put, Wall Street analysts appear to be in no mood to hear co-CEO Jim Balsillie's usual confidence and swagger. RIM is expected to report earnings of $1.35 a share on revenue of $4.47 billion, but reports that Android devices are gobbling up share have observers spooked. The big question is whether RIM can regain past glory when its recently launched device may not even be able to hold ground against Android and Apple's iOS.

Now things may not be that dire, but the consensus view definitely falls on the pessimistic side of the fence.

To wit:

William Blair analyst Anil Doradla said in a research note:

For the second consecutive quarter, RIM did not have a top-selling smartphone at any of the four major North American operators. Android devices, led by HTC, Motorola, and Samsung, continued to take market share from RIM, most notably at Verizon. Relative to our June checks, RIM had a similar number of second or third best-selling devices, but our sense is the gap widened, with the top-selling devices dominating the smartphone segment in recent weeks. Additionally, as we noted in an August 13 first look at the Torch response, although we believe the Torch held the No. 2 position at AT&T, we believe the launch was largely disappointing, particularly in light of a strong launch of the iPhone 4. In our view, the recent checks confirmed a pattern in which RIM is losing its grip in the North American smartphone market.

Susquehanna Financial Group analyst Jeffrey Fidacaro said:

In our opinion, the Blackberry 6 OS is a much anticipated and necessary upgrade for RIM devices; however, it only incorporated features and functionality that we believe places it just shy of iOS 4 and Android 2.2. Moreover, our checks with AT&T stores show Blackberry Torch demand that is somewhat disappointing. While we expect Blackberry 6 to create an upgrade cycle for existing Blackberry users over the next few quarters, our findings show that the new OS platform is not compelling enough to significantly sway users from the iPhone or Android-based devices...

And it's not even looking so hot in the enterprise, Fidacaro added:

The increasing interest in employee-owned devices within the enterprise, combined with advancing features and functionality from platforms that compete with the Blackberry Enterprise Server are  expected to become a material chink in RIM’s enterprise armor.

Wedbush analyst Scott Sutherland said:

We believe that RIM has significant international potential with only 34% of FQ1 revenue from markets other than the U.S., U.K, and Canada, despite presence in 550 countries and 175 carriers, and ~75% of smartphone sales outside these markets. However we believe that a timely resolution of the security concerns in these markets such as India and the Middle East will be needed in order for RIM to continue solid growth internationally. We also believe that balancing concerns of enterprise customers over surveillance with the security concerns of the governments could prove tricky.

Add it up and it's a bit difficult to find anyone upbeat about the Torch's sales and that pessimism is likely to filter through to RIM's enterprise business. If the consensus is to be believed, RIM's foothold is slipping in most key areas. Balsillie is going to need one great performance to convince observers otherwise.

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