Research in Motion’s (NASDAQ:RIMM) stock dropped by around 20% when the company announced its August ending fiscal year Q2 2012 results last Thursday. The results were clearly disappointing, which led us to revise our price estimate lower for RIM stock to $26. Our price estimate for RIM stock is now 10% above market price. In our earlier note titled RIM Blows it with Investors Again, Lowering Estimates, we discussed that the main factors behind such disappointment were related to the weak BlackBerry and PlayBook shipments. We will now take a look at the upcoming quarter when we believe that RIM will face even tougher challenges from Apple (NASDAQ:AAPL), Nokia (NYSE:NOK), Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG) in the smartphone market.
RIM to face increased competition in the next quarter..
We expect Apple to introduce the new version of iPhone in October this year, which has implications for all smartphone players given the role of the iPhone. Apple introduced the iPhone 4 in June last year, and hence there is huge pent-up demand for iPhone’s new version among users.
RIM will also have to cope up with increased competition from Nokia as we expect Nokia to introduce smartphones based on Microsoft’s Windows Phone 7 platform before the end of this year. And then Google plans to roll out an advanced version of Android named Ice Cream Sandwich, which will be a common OS that will work both on smartphones and tablets.
..Could cause RIM’s optimism to fade
As shown in the above chart, RIM has fallen short of its own estimates of BlackBerry shipments for the last few quarters. RIM has given a rather optimistic outlook of 14 million BlackBerry shipments for the next quarter based on the premise that its smartphones based on BlackBerry 7 operating system will find uptake. However, we believe RIM will again fall short of its own estimates in the next quarter due to increasing competitive pressures.
