Shares of Research In Motion (NASDAQ:RIMM) dropped about 4 percent after a Wall Street analyst expressed concerns over the BlackBerry maker achieving its quarterly forecasts.
RIM, once the darling of technology investors, is struggling to come to terms with strong competition posed by Apple and Android devices. The company's much touted BlackBerry device is losing share to Apple's iPhone and Android devices.
Apple and Google are also trying to woo enterprise market, which has been the forte of RIM. The company's PlayBook tablet also failed to stand against Apple's iPad and other Android tablets such as Samsung Galaxy Tab.
In addition, RIM is bearing the brunt of aggressive smartphone pricing by competitors and lack of carrier support. RIM is experiencing significant volume deceleration and BB7 devices are also seeing a significant slowdown. Older devices are also slowing in all markets as Huawei, ZTE, and Lenovo price very aggressively in their markets.
"According to carriers we checked with, for $150 unsubsidized (free when subsidized) people can get a solid Android 2.3 device that is better than most Blackberries," Jefferies analyst Peter Misek wrote in a note to clients.
As the company faces PlayBook execution issues, it may delay its QNX devices.
"Our checks indicate the issues have led to a fire drill and resources being pulled off of other projects. We think this will cause QNX delays," Misek said.
No wonder, the Wall Street is expecting RIM's fourth-quarter earnings to drop 53 percent and sales to fall 17.5 percent from last year. Street expects fourth-quarter earnings of 83 cents a share on revenue of $4.58 billion, according to analysts polled by Thomson Reuters.
Misek, who has an "underperform" rating on RIM shares, said there is a strong probability that RIM may negatively preannounce its fourth-quarter numbers as sales of both RIM's low-end and higher-end phones continue to be challenged.
"We believe there is a greater than 50% chance that RIM will negatively preannounce the Feb quarter and that RIM will miss the low-end of their 11M to 12M guidance range," the analyst said.
Misek lowered his fourth quarter BlackBerry smartphone shipment estimates to 10.5 million units from 12 million units. The analyst also slashed its earnings projection to 69 cents a share and revenue view to $4.2 billion, from 82 cents a share and $4.6 billion, respectively.
"If RIM does make their guidance we believe the difference between sell-in and sell-through would cause a correction in the May quarter suggesting a very weak guide for May. Either way we see consensus numbers as too high," Misek noted.
In December, RIM guided fourth-quarter revenue of $4.6 billion to $4.9 billion, earnings of 80 to 95 cents a share and gross margin of about 38 percent. In the same month, RIM had to revise its third quarter and fiscal 2012 forecasts as it took a hefty charge related to its inventory valuation of PlayBook tablets.
Last month, the company rejigged its top management and named Chief Operating Officer Thorsten Heins as President, CEO and director of the company, effective immediately. Heins would succeed Co-Chief Executive Officers Jim Balsillie and Mike Lazaridis.
The analyst said higher-end handsets are doing poorly outside of Enterprise sales with continued iPhone 4S and Android momentum (especially Samsung) causing issues. Meanwhile, Misek's checks show that sales in Europe decreased significantly towards the end of the quarter and this is a heavy blow as international sales had typically been more resilient.
"We believe an iPhone 5 launch (we expect towards the end of Q2/Q3) ahead of the BB10 launch (we expect Sep) will be particularly troubling. The BB10 will also have to compete head-to-head in H2 with Microsoft/Nokia as the Windows 8 platform attempts to become the #3 player. Moreover, we believe RIM will not launch any major new handsets before BB10," Misek wrote. RIM's woes reflect in its share performance. They have lost 79 percent of their value in the past one year and have been trading between $12.45 and $68.81 during the past 52-weeks. Shares of Waterloo-Ontario-based RIM were down 3.81 percent, or 54 cents, to $13.63 on Nasdaq. Misek has a price target of $12.