MONTREAL — The BlackBerry has made its name providing first-rate functionality, but its future may be decided on fashion appeal as its maker Research in Motion takes on a host of ever flashier competition for the North American consumer.
RIM (TSX:RIM) has been losing market share on the continent to Apple’s iPhone and Google’s small army of Android phones, leaving analysts to question its future in the competitive smartphone market.
While RIM’s financial results will likely meet expectations when they’re released on Thursday, North American performance will be a sticking point.
“The majority of revenues still come from North America,” said William Blair & Co. analyst Anil Doradla, adding that the average consumer doesn’t always care about the bandwidth efficiency that BlackBerrys provide.
“People want the latest and the greatest. It’s almost a fashion factor that’s kicking in now,” Doradla said Wednesday from Chicago.
RIM is expected to give an update on the August launch in the United States of its new BlackBerry Torch device, which has a pull-out keyboard and a touchscreen as well as an updated operating system for faster Internet surfing.
The Torch is believed to have held the No. 2 position at U.S. wireless carrier AT&T, confirming a pattern that RIM is “losing its grip” in the North American market, Doradla wrote in a research note.
According to Citigroup Global Markets analyst Jim Suva, RIM’s share of the North American smartphone market has dwindled to 34 per cent from 54 per cent a year ago.
Consumers have more compelling devices from which to choose, Suva said, noting the iPhone and Android smartphones.
The Torch doesn’t “burn brightly” with consumers, Suva said in a research note, describing demand as “tepid.”
“We believe RIM’s market share has peaked globally, as well as in North America,” Suva said.
BMO Capital Markets analyst Tim Long estimated that RIM sold 200,000 Torch devices in the first week, consistent with other high-profile Android launches like the Motorola Droid but below iPhone launch numbers.
Long also said he expects RIM to launch a tablet computer aimed at the business market that should begin shipping in early 2011.
Like other analysts, he predicted North American growth will be basically flat with international markets like Latin America again driving growth.
RIM may also address security concerns that India and Middle Eastern countries have about the access to information on BlackBerrys on a conference call Thursday to discuss its financial results.
“We also believe that concerns about enterprise and security in some international markets are overdone,” Long wrote in a note, reiterating his “outperform” rating on RIM shares.
“Our checks with the supply chain, carriers and distributors have all pointed to an in-line or better August quarter,” he said.
Citigroup’s Suva, however, downgraded RIM to “sell” last year and maintains the rating, though he doesn’t believe the Waterloo, Ont., company will miss estimates on its second-quarter 2011 results.
Analyst expectations compiled by Thomson Reuters are calling for second-quarter revenue of $4.5 billion and earnings per share of $1.34. The company is expected to have shipped between 11.8 million and 11.9 million devices during the quarter and have five million net subscriber additions.
Suva said earnings per share could move higher due to RIM’s share buy-back program this summer.
Shares in Research In Motion were up 38 cents at $46.77 Wednesday on the Toronto Stock Exchange.