In about a week, Research In Motion Ltd (NASDAQ:BBRY) will report Q1 2014 earnings and give a slightly better picture for how the latest BB10 smartphones are selling. Until now, analysts have been fighting it out over whether this will be the short squeeze trigger or a final nail in BlackBerry’s coffin. A lot of these analysts are deep in their convictions and will interpret the earnings in their own way, spinning the results as they believe suits their position best. While some analysts will be able to provide objective coverage of the event, others may employ the tactics described below.
The unfair comparison
Sales estimates of the Z10 and Q10 have varied widely, but among the most bullish are the estimates from Societe Generale, which call for sales of around five million units in total. Based on current sales estimates from other analysts, sales of five million would solidly beat the Street’s expectations for Research In Motion Ltd (NASDAQ:BBRY), but some analysts may try to spin results another way.
A comparison may be drawn between the BB10 phones and the Samsung Galaxy S4 phone, the latest smartphone in the Samsung lineup powered by Google Inc (NASDAQ:GOOG)’s Android operating system. With Reuters reporting analyst expectations of 7 million S4 sales per month, the S4 would be blowing BlackBerry out of the water.
But everyone expects Samsung to outsell Research In Motion Ltd (NASDAQ:BBRY) and the targets BlackBerry needs to meet to grow earnings and gain market share are much smaller than those of Samsung. When Apple Inc. (NASDAQ:AAPL)’s iOS operating system and Google Inc (NASDAQ:GOOG)’s Android operating system are combined, a near duopoly in the smartphone market emerges. Apple and Samsung/Google are the top two smartphone makers by volume and are expected to maintain these spots for the indefinite future. And even with sales of 7 million S4s, these numbers are below initial targets for the phone’s sales. BlackBerry is fighting for a number three spot and, consequently, its sales should be judged on Research In Motion Ltd (NASDAQ:BBRY) estimates, not comparisons to Apple and Samsung.
A look at past RIM glory
Back in the golden days of Research in Motion, now BlackBerry, the company defined the smartphone for high powered executives, politicians, and those who needed to stay connected. Among many people, a smartphone was a BlackBerry as a tissue was a Kleenex. But, as happens with technology, a new competitor changed the image of the smartphone. That competitor was Apple Inc. (NASDAQ:AAPL), and BlackBerry has never occupied the lead position again.
Bringing up this story of the fall of RIM gives a bearish undertone to anything BlackBerry, painting the company as one on its last legs and ready to go the way of BetaMax. But the Research In Motion Ltd (NASDAQ:BBRY) of the past is not the company stockholders are betting on now. Current investors are betting on a recovery with a new series of BB10 phones, and the expectations for sales have been laid out fairly clearly by a whole host of analysts over the past several months. The bottom line is that comparing the market share of the current BlackBerry to the old RIM misses the point that the BlackBerry investors are betting on now is a recovery play and is priced as such with market expectations far short of those for RIM at its peak.