Toronto: It's official: With the launch of Research In Motion's PlayBook tablet now just a month away, the BlackBerry maker's battle against Apple and Google is at the cusp of a fierce new phase.
While investors await the initial consumer response to the long-awaited PlayBook tablet, the Canadian technology company has one more set of quarterly results to unveil.
The report is likely to show RIM treading water one more time, portraying its global growth story as on track. As with most recent quarters, the catalysts are sure to be higher overseas sales of cheaper handsets, US discounts and narrower profit margins. Turmoil at Nokia, the leader in the low-end of the market, probably didn't hurt matters either.
But RIM is about to add a tantalizing new ingredient to the mix. It said Tuesday that its 7-inch PlayBook tablet, a direct competitor to Apple's iPad and a step away from the Canadian company's laser focus on smartphones, will go on sale on April 19 in North America.
The PlayBook will likely contribute only marginally to sales and earnings this year. Even so, it represents a nascent market opportunity for RIM, which will go toe-to-toe against the iPad and a tough crowd of other rivals - many using Google's Android software.
RIM, once undisputed king of mobile communication, has lost momentum as slicker Android and Apple products garner plaudits and threaten its corporate bastion. Perenially underappreciated RIM has little room for error and a small window to impress.
RIM's tablet will sell in 20,000 retail and wireless carrier outlets including Best Buy for as little as $499, matching the pricing for Apple's latest iPad.
RIM is hoping the PlayBook's natural affinity with its corporate-friendly smartphones gives sales an early boost and offsets a move by more companies to allow workers to use their own non-BlackBerry smartphones to access work-related email and data.
"The big question is the Playbook's appeal to those not already part of the BlackBerry world," said CCS Insight's Geoff Blaber.
Apple sold nearly 15 million iPads in nine months of 2010, two or three times as many as analysts had predicted. It is expected to sell 30 million or more this year.
Expectations for the PlayBook are lower, with between 1 million and 4 million sales seen this year.
Scotia Capital analyst Gus Papageorgiou, who expects sales at the high end of that range, said the expansive distribution network could boost PlayBook 2011 sales to more than 7.3 million in North America alone.
WHAT NEXT?
Looking further ahead, analysts are eager for details on RIM's plan to migrate the QNX engine powering the PlayBook as it refreshes its smartphone lineup, which could feature more touchscreens by mid-year.
"The company won't be happy with being shoved down to the low end and will be looking to revamp its high end and the margin pressure might come later in the year," said James Cordwell, an analyst at Atlantic Equities in London.
Peter Misek, an analyst from Jeffries, said he expects hybrid QNX/BlackBerry OS devices as early as mid-year and "super" QNX BlackBerrys in 2012.
The conference call following RIM's numbers could also provide first extended executive comments on supply chain disruptions for mobile devices due to the Japanese earthquake.
The launch of RIM's tablet comes almost a month after the iPad 2 goes on sale outside of the United States from Friday, easing some concern that the unfolding Japan crisis might curtail the previously announced rollout.
CHEAPER DEVICES, STEADY MARGINS
RIM likely shipped almost 14.9 million devices in the quarter, which included Christmas and Valentine's Day, according to 12 analysts surveyed by Reuters. They shipped 14.2 million in the previous quarter.
Analysts on average expect RIM to earn $1.76 a share on revenue of $5.64 billion, both numbers some 38 percent higher than comparable figures from a year earlier, according to Thomson Reuters I/B/E/S.
RIM's own forecast is for sales of between $5.5 billion and $5.7 billion and earnings of between $1.74 and $1.80 a share.
In its last reported quarter RIM got 44 percent of its revenue from outside North America and Britain. That portion is expected to grow as RIM extends deeper into emerging markets.
Marvell, one of RIM's main chip suppliers, said a major customer - widely understood to be RIM - is buying less of its chips as it shifts towards cheaper parts.
RIM uses Marvell chips in its higher-end Torch and Bold models but not low-end phones such as the Curve 8520, according to Raymond James analyst Steven Li.
A shift in mix towards cheaper phones will hit average selling prices and mean RIM must ship even more phones to boost revenue, but will likely not hit operating margins, which at 43 percent are among the highest in the mobile industry.
Meanwhile, a November discount on its Torch model, launched in August with an improved browser, may have offset RIM's US market share losses since Verizon started selling the iPhone.
Turmoil at global rival Nokia, which has sidelined its own software platforms to ink a deal with Microsoft, could bolster RIM in big growth markets as it sells increasing numbers of its lower-end smartphones, such as the Curve 8520, in Latin America, South East Asia and elsewhere.
"Nonetheless, at the low-end smartphone market, we are already seeing increased competition from Chinese manufacturers ZTE and Huawei with solutions based on Android," Susquehanna analyst Jeffrey Fidacaro wrote in a note.
Analysts expect RIM's earnings to drop to $1.65 a share in the current quarter on revenue of $5.65 billion.
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