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Is BlackBerry 10 the Light at the End of the Tunnel?

Posted on Tuesday, Apr 3rd 2012

BlackBerry maker Research in Motion’s (NASDAQ: RIMM) performance continued to disappoint the market. The company is fighting a losing battle against Apple and Google. Last year, Apple’s share in the mobile device segment grew from 16% to 24% ,while RIMM’s share slipped from 14% to 8%. Google is also making strong progress in the segment, especially because they recently purchased Motorola Mobility.

RIMM’s Financials
Q4 revenues of $4.2 billion fell 25% over the year and were short of the market’s projected earnings of $4.5 billion. EPS of $0.80 also missed the Street’s targeted $0.81.

For the quarter, BlackBerry shipments fell 21% over the year to 11.1 million units. Compare that with iPhone sales of 37 million units in the quarter ended December 2011. PlayBook sales improved to more than 500,000 driven by big discounts offered to buyers.

RIMM’s BlackBerry 10
RIMM’s hopes to regain some market share rest on the launch of their new BlackBerry 10, which will be powered by their new QNX-based operating system. However, the product is expected to be available only by the end of the year. Meanwhile, competition will continue to grow as new Android and Windows phones continue to flood the market. In addition, it is not certain that the BlackBerry 10 will be able to save RIMM, especially since Playbook, which was based on the same OS, did not deliver stellar results.

Meanwhile, to capture some of their lost market, the company is evaluating the possibility of selling or even licensing their proprietary operating system as part of evaluation of available strategic opportunities. Over the past years, RIMM has lost significant market share as they have restricted developer access to their OS. The limited app availability has driven several consumers to Android- and iOS-based devices. Further, players like Apple are continuing to push within corporate users, a move that may eat gradually into RIMM’s competitive advantage.

RIMM’s Prospects
Analysts believe that the list of suitors wishing to acquire RIMM is growing as their performance continues to spiral downward. After suggesting Microsoft and Apple earlier, they think players like Amazon and Samsung may also be interested. Unfortunately, though, RIMM’s market capitalization of more than $7.5 billion makes it an expensive purchase for many.

For now, RIMM is focusing on getting their house in order. They announced plans to cut jobs to control costs and also reorganized senior management positions. Co-CEOs Jim Balsillie and Mike Lazaridis stepped down earlier and were replaced by Thorsten Heins. Besides the CEO, their chief technology officer, David Yach, and chief operating officer, Jim Rowan, also resigned.

Their stock is trading at $14.37 with a market capitalization of $7.53 billion. It touched a 52-week high of $57.32 in April 2011.

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