RIM's prospects take a turn for the better

Beleaguered BlackBerry maker Research in Motion (RIM) has had a run of good press in recent days, with headlines like "RIM shares rally as optimism about new devices grows," "Investors find life in RIM ahead of BlackBerry 10 launch," "RIM Ends Week Up 27% - Can It Continue?" However, these all seem to be traceable to one source.

Last Thursday, 22 November, Reuters reported: "Shares of Research In Motion Ltd surged 17.3 percent in Toronto on Thursday on rising optimism around RIM's soon-to-be-launched BlackBerry 10 devices that will vie against Apple's iPhone and Android-based smartphones."

The share price rally, it said, had been "sparked by [Canada's] National Bank analyst Kris Thompson, who boosted his price target on RIM shares to $15 from $12."

There's been a remarkable turnaround both in RIM's market fortunes and Thompson's assessments of the company. In recent months Thompson has been one of the most pessimistic analysers of RIM's fortunes. So perhaps its not too surprising that his change of heart has been seized on so eagerly by investors.

However expectations of a turnaround in RIM's fortunes are not shared by those firms that analyse the overall smartphone market and attempt to predict future market shares.

In its latest mobile phone sales market share report Gartner said that RIM's share of sales by units had declined from 2.9 percent of total in Q3 of 2011 to 2.1 percent in Q3 of 2012 and its share by operating system from 11.0 to 5.3 percent over the same period.

According to Anshul Gupta, principal research analyst at Gartner, "Both HTC and RIM have seen their sales declining in past few quarters, and the challenges might prevent them from holding on to their current rankings in coming quarters."

Is the market's faith in RIM's future justified? Certainly not on the basis of Thompson's assessment alone.

Reuters added: "Thompson believes that there is more money to be made in the stock ahead of the early 2013 launch of the make-or-break new line of devices." So his predictions, in part at least, have nothing to do with the ultimate success, or otherwise, of BB10.

There's also a suggestion that the market might be feeding on its own optimism. Thompson has increased his forecast for BlackBerry shipments for FY2014 from 31.6 million to 35.5 million (4.0 percent to 4.5 percent market share), adding: "The shipments boost reflects about one more month of BB10 product availability [now expected in February rather than March] plus a little extra for the positive sentiment building in the industry from our discussions."

Maybe not enough to justify the hike in the share price. Thompson however has been a close RIM watcher for some time and his most recent pronouncements on the company stand in stark contrast to his recent pessimism.

Last July when RIM had just announced that BB10 would be delayed until Q1 of 2013, Thompson wrote: "RIM is intent on launching a 'distinct' smartphone platform; all we see at this point is an extinct platform. Are consumers and enterprises really going to wait for another platform? NO!"

Thompson however is not alone in predicting a resurgence of RIM's fortunes. Jefferies & Co analyst Peter Misek was reported saying that operators had adopted "much more positive view of BB10 than expected" and Ironfire Capital's Eric Jackson told Bloomberg. "Most are greatly underestimating how many loyal subscribers will upgrade to BB10 in calendar 2013. All those pending upgrades are currently not factored into the stock."

Notwithstanding the renewed optimism, the reality is that Android's march to market dominance seems unstoppable. According to Gartner its share of global sales rose from 52.5 percent in Q3 of 2011 to 72.4 percent in Q3 of 2012, pushing the market share of every other mobile OS down except that of Microsoft, which managed to grow its market share by 60 percent. But that's nowhere near as impressive as it sounds: it went from 1.5 percent to 2.4 percent.

And Windows Phone 8, tightly integrated as it is with its desktop counterpart and backed by one-time handset market leader Nokia is likely to prove a substantial challenge to RIM in its traditional stronghold: the enterprise.

Meanwhile tales of wholesale defection from RIM by large corporates continue to emerge. Qantas announced in July that it would replace 1300 employee BlackBerries with iPhones. Global consulting firm Booz Allen Hamilton with 25,000 employees is also reported to have dropped the BlackBerry.

In these uncertain times it would a rash investor to bet on the long term future of RIM. Thompson's assessment's of RIM, from May this year undoubtedly still hold true; "Buying this stock is like going to the casino."

This article first appeared on iTWire, Australia's leading independent IT&T news and information source.