Don’t Write Off Research In Motion Ltd (BBRY) Yet

On the OS side, BB10 is clearly competitive with WP8 and Android 4.2, and all three operating systems are starting to make iOS seem very dowdy.  Like iOS and WP8, BB10 offers quick one gesture switching between apps, but the important OS advantage for BB10 is in BlackBerry Balance, a system that segregates work and personal apps and data.  No other mobile OS offers this, and it should appeal to IT departments contemplating upgrading Research In Motion Ltd (BBRY) users to the Z10.

Cautionary notes

BlackBerry’s earnings report was a little deceptive in claiming GAAP income from continuing operations of $94 million for the final fiscal quarter (ending March 2). In fact, the company posted a GAAP operating loss for the quarter of -$12 million, and made up the difference in a tax refund of $112 million plus some other minor gains and losses.

For the full fiscal year, Research In Motion Ltd (BBRY) posted an operating loss of -$1.235 billion compared to an operating profit for the previous year of $1.497 billion. Revenue is also down by a whopping 40% to $11.07 billion for the year.  Gross margin was also down for the year to 31% from 35.7%. However, gross margin turned up in the final quarter to 40.1%.

Clearly BlackBerry has an uphill struggle ahead of it and is the underdog in its battle with Microsoft for third place in worldwide mobile OS market share. Neither side is assured of victory.

Investors should keep an eye on reports from IDC and Gartner on smartphone market share for signs of which way the battle is going.  Also watch for Nokia’s earnings report, since they report actual shipments of WP8 phones, unlike HTC. Since the IDC and Gartner reports typically come out after earnings season, Nokia’s earnings report will be the first data on the relative strength of Windows phone sales.

If WP8 sales come in at about 5 million, as I currently expect,  (about 3 for Nokia, 2 for HTC), then I would say that Research In Motion Ltd (BBRY) has a fighting chance.