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RIM surpasses Palm, but future still in shadows
By siliconindia
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Monday, 21 December 2009, 15:27 IST |
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Ottawa: BlackBerry maker Research in Motion (RIM) has reported a strong quarter growth, which has helped the company to gain a considerable advantage over Palm. Even then, there are still doubts that RIM will be able to maintain that position for a long time, according to Reuters.
RIM shipped a record-breaking 10.1 million phones in the third quarter and expects to ship 10.6-11.2 million phones in the current quarter at an average selling price of $320. The company reported third-quarter profit of $1.10 a share and revenue of $3.92 billion, well ahead of analysts' expectations for a profit of $1.04 a share and $3.78 billion in sales. But strong international sales masked a string of structural weaknesses, said Sanford C. Bernstein Analyst at Pierre Ferragu. He also said that RIM faces an increasingly tough fight for market share in North America, where Motorola's Droid phone had a meaningful impact for only a few weeks.
Even as RIM's stock jumped 10 percent on Friday, analysts were questioning the company's ability to maintain profit margins as it battles for market share with rival products, such as Apple's iPhone and Motorola's Droid. Round one in the smartphone battle goes to RIM, said UBS analysts Phillip Huang and Maynard Um, but the second round looks like a tougher fight. "Handset industry competition is set to increase with both traditional and non-traditional vendors ... (which) may use price as an incentive to drive units," they wrote in a report which raises their earnings estimates and stock target price.
Palm has reported disappointing result, and analysts said it looks likely to focus on boosting sales rather than profit in the near term. Analysts agreed that Palm, which gave a disappointing earnings outlook, faced even greater challenges in an increasingly competitive market that including devices based on Google's Android software.
Palm said on Thursday that its partner Sprint Nextel was selling fewer Pre and Pixi devices than expected. And while it reaffirmed its fiscal 2010 forecast for revenue of $1.6 billion to $1.8 billion, it plans to spend aggressively on a marketing blitz to achieve that. "There was not a lot of encouraging news in Palm's guidance," said CL King Analyst Lawrence Harris, adding that the results showed the Palm webOS user interface may be less popular than the Android and iPhone browsers.
Allaying fears for the future are RIM's manufacturing efficiencies, well-received product launches, technology advantages and increasingly attractive brand, analysts say. "The long term thesis for growth remains intact with international expansion, aggressive carrier promotions, new consumer awareness, economies of scale and steady new product introductions." said Paradigm Capital Analyst Barry Richards in a note.
Charter Equity Research Analyst Ed Snyder thinks RIM is still behind the curve. He said the BlackBerry maker will face "a difficult period ahead as it reaches further down the value chain to fuel its growth." RIM has cornered the corporate market, but it has not yet launched a touchscreen, media-centric phone that captures consumer imagination, he said. "We think that it will be a full design cycle (12 months) before RIM regains its hero status at a North American carrier," he added.