Storm clouds gather for RIM after profit warning

TORONTO Fri Apr 29, 2011 1:12pm EDT

A person surfs the internet through a Blackberry in Jakarta January 10, 2011. REUTERS/Enny Nuraheni

A person surfs the internet through a Blackberry in Jakarta January 10, 2011.

Credit: Reuters/Enny Nuraheni

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TORONTO (Reuters) - Storm clouds over Research In Motion have darkened with a dismal profit warning, and the company's shares fell sharply on Friday after the company's third jolt of bad news in a month.

The BlackBerry maker, out of favor even with its fans, will need flawless execution on a promised next generation of gadgets to convince increasingly skeptical investors that it can run with mobile leaders Apple and Google.

Ontario-based RIM on Thursday slashed its sales and earnings forecasts, an unexpected blow that followed an anemic forecast in late March and last week's troubled launch of an as-yet underwhelming competitor to the red-hot Apple iPad.

"The updated guidance has substantiated a lingering concern about a growing portfolio gap in a hyper-competitive market," CCS Insight analyst Geoff Blaber said.

RIM tried to excite customers last year with an improved browser and upgraded operating system on its touchscreen and slideout keyboard BlackBerry Torch. But the response was tepid.

It promises another major upgrade and a slew of more powerful touchscreen devices at its annual BlackBerry World trade show in Florida next week.

RIM's products compete with those from Apple and with devices using Google's Android platform. Customers, are tired of waiting for RIM's innovations to kick in, are voting with their dollars for the rival phones.

RIM shares fell some 14 percent by early afternoon on Friday, in line with a late-trade fall on Thursday -- an eerily similar drop to that after its March results. The shares are around $49, their lowest level since October.

"We've heard for too long about RIM's great product roadmap. Consumers are not listening nor waiting," National Bank analysts said in a note. "RIM does not even seem to have dual cameras on its upcoming BlackBerry product line-up. The last time we checked, video is the future."

Thursday's after-market warning focused on weak sales of RIM's aging smartphones in the United States and Latin America, and the company lowered an already tepid outlook for the current quarter.

All hope seems to rest on what the Canadian company pulls out of its labs and onto center stage at BlackBerry World, starting Monday, where the company will unveil a new generation of touchscreen BlackBerrys.

LOSS OF FAITH

RIM had hoped to turn its fortunes around with the launch of its long-awaited PlayBook tablet -- a sleek tablet computer that runs on a fresh QNX platform that RIM says will transform its business.

But the PlayBook won dismal reviews and complaints it was rushed out before it was ready, despite a six-month launch pad.

"Mis-execution has undermined sentiment recovery," wrote Mike Abramsky, a longtime optimist on RIM. Abramsky kicked RIM out of his list of preferred stocks and slashed his target price to $55 from $90.

"PlayBook is a promising tablet contender, but RIM bears some responsibility for its less-than-favorable debut, confusion over its positioning and criticisms it was not fully ready for market," he wrote.

Customers and developers are eager to know when the PlayBook will run Android and BlackBerry smartphone applications, while investors want to know how many PlayBooks sold in the first week and when better phones will ship.

Jefferies analyst Peter Misek said RIM was scrambling to fix glitches in the PlayBook and integrate QNX, likely leading to delays for new handsets and flagging interest from carriers. He dropped his rating by two notches to "underperform" and cut his price target to $35 from $80.

RIM has tried to shift attention to what comes next -- a suite of phones running an upgraded (but not yet QNX-based) operating system with beefed-up hardware.

"We're cutting over to a whole new platform, a whole new set of products, a whole new set of architecture. And it's very, very powerful and very, very exciting," RIM's co-chief executive Jim Balsillie told a conference call on Thursday.

"Stay tuned, the products are truly fantastic both in terms of their style and their performance. The issue is, I would have liked to have them sooner."

The sliding stock price shows that the market is yet to be convinced.

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