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RIM: BlackBerry Still the Dominant Smartphone, For Now

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RIM: BlackBerry Still the Dominant Smartphone, For Now
September 10, 2010
By Susan J. Campbell, TMCnet Contributing Editor


Research in Motion is not having a good month. The company is battling overseas governments over its secure messaging and e-mail system on the BlackBerry (News - Alert) and now its shares are sitting at an 18-month low. A recent story captured in Marketwatch tells of the pressure the company is under to demonstrate the value of the BlackBerry is a market where popularity is soaring for the iPhone (News - Alert) and Droid. 

Stakeholders are expecting a turnaround for RIM, but some investors are discouraged at a dismal outlook. While the company has averaged sales and earnings growth of more than 60 percent per year over the last five years, the stock lost nearly 25 percent of its value since its last earnings report. According to Shaw Wu of Kaufman Bros., the biggest challenge for RIM is that it is competing with Apple and the iPhone. 

The rapid adoption and success of the Google Android mobile platform is also helping to cut in on its share of the market. Data gathered by Gartner (News - Alert) shows RIM’s share at 18.2 percent in the second quarter, down from 19 percent in the same period last year. In the same period, Android jumped from 1.8 percent to 17.2 percent and Apple (News - Alert) from 13 percent to 14.2 percent. RIM’s numbers for August are expected to be healthy as the company launched the BlackBerry Torch. Introduced early in the month, this model is the first for RIM with a slide-out keypad and to feature the new BlackBerry OS 6 operating system. Analysts feel the sales of this product have been strong, even while competing against the iPhone 4.

The news out of Wall Street is good as it expects RIM to deliver strong double-digit earnings growth for the August quarter. Net income is expected to jump 28 percent to $750.5 million compared to the same period last year. Revenue is expected to grow 27 percent to $4.49 billion. Even as the Wall Street outlook is strong, some analysts believe RIM’s future is rocky. Fewer enterprises will be willing to enter exclusive deals as employees are demanding the capabilities of the iPhone and Droid. In fact, survey results from Bernstein Research reveal that 74 percent of companies in the U.S. and Britain that use mobile e-mail allow non-BlackBerry smartphones. 

The value proposition for RIM and its BlackBerry – and the element that drove significant market penetration – was its secure messaging encryption technology. This same technology is the root cause of its problems overseas. The smartphone market is evolving and as more players enter this space, RIM may have to re-think its strategy to effectively compete and stop the shrink of its market share.

Susan J. Campbell is a contributing editor for TMCnet and has also written for To read more of Susan’s articles, please visit her columnist page.

Edited by Juliana Kenny

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