RIM Stumbles Ahead of BlackBerry 10 Event

blackberry1Shares of Research in Motion (NASDAQ:RIMM) tripped over an analyst comment on Monday morning and fell as much as 7.6 percent before bouncing back slightly. RBC Capital predicts that the company’s stock will will fall after the BlackBerry 10 event on Wednesday because many of the details of the new platform have been leaked already. RIM’s BlackBerry 10 launch has been framed as an all-or-nothing ordeal for months, and just two days before the event it’s clear that investor sentiment is all over the place.

The stock is up nearly 50 percent since the beginning of the year, climbing from $12 to nearly $17 in a matter of weeks following a post-earnings plunge in December. RIM’s third-quarter report for fiscal 2013 showed a 47 percent year-on-year drop in revenue to $2.7 billion, and GAAP net income was $0.02 per diluted share, compared to $0.51 in the year-ago period.  Adjusted net income came in at a loss of $0.22 per share.

Markets are at 5-year highs! Discover the best stocks to own. Click here for our fresh Feature Stock Pick now!

The key stat out of the report was “approximately 79 million users,” which was backed up by 6.9 million smartphone shipments. Many observers have come to expect that these remaining users are die-hard customers who are likely to upgrade to BB10, suggesting at least a moderately healthy reception. The analysts at RBC Capital are forecasting 10 million BB10 sales in 2013, but are also expecting margins to drop once again. RIM’s gross margin fell from 27.2 percent in the third quarter of the company’s fiscal 2012 to 26.0 percent in the third quarter of fiscal 2013.

blackberryBB10 will be entering a fairly well-defined market dominated by just a few players. Apple (NASDAQ:AAPL) remains the industry leader in innovation, ruling the high-end market with an iron fist despite the recent sell-off. Through Android, Google (NASDAQ:GOOG) has spread itself to every corner of the globe and has proven to be popular in many of the same emerging markets where cheaper BlackBerry devices have found a home. Both tech titans have been increasing their share of the market at the expense of smaller players, and RIM will have to do more than have a successful launch to keep up.

Nokia’s (NYSE:NOK) fight back from the brink could offer some insight into what to expect. It seems unreasonable to predict that the launch of BB10 will immediately turn RIM around. The Nokia-Microsoft (NASDAQ:MSFT) partnership demonstrates that a soft launch can build momentum, and that the behavior of smaller players in the smartphone market is different than larger players. Though it would be nice, Nokia and RIM aren’t looking for 20 or 30 percent of the market. Not yet, at least.

What they’re looking for is a profit-making foothold. A stable 5 or 10 percent share of the market is a healthy platform on which to stage growth. Remember that the total smartphone market is growing at an alarming rate, faster than any individual company can keep up with. The idea of “winner take all” was given up a while ago, and “two winners take all” also seems inaccurate.

But that’s not to say RIM will easily find a role in the global market. The company will have to fight to maintain its user base and fight harder to add users. As it does so, its stock will fluctuate with the tides of investor sentiment. Until sales and user numbers demonstrate growth, the company’s future will remain bound by speculation.

Research In Motion Limited Stock Chart - RIMM Interactive Chart - Yahoo! Finance

Don’t Miss: Analyst: High Hopes Are Killing Apple.