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The End of the Road for Research In Motion Ltd (BBRY)

Times are tough for Research In Motion Ltd (NASDAQ:BBRY). The Canadian smartphone maker, formerly known as Research in Motion, lost nearly 30% of its market cap recently after reporting first quarter earnings and revenue that came in far below analyst estimates. BlackBerry’s decline has been a steep one, with its stock plummeting over 90% from its peak in 2008. The arrival of Apple Inc. (NASDAQ:AAPL)’s seminal iPhone in 2007, followed by the birth of Google Inc (NASDAQ:GOOG) Android in 2008, left the company in the dust, along with former handset heavyweights Motorola and Nokia Corporation (ADR) (NYSE:NOK).

BlackBerry Ltd (NASDAQ:BBRY)

However, Motorola was later acquired by Google Inc (NASDAQ:GOOG), Nokia Corporation (ADR) (NYSE:NOK) partnered up with Microsoft Corporation (NASDAQ:MSFT), and both brands have shown faint flickers of life again. BlackBerry, on the other hand, continues to go at it alone, hoping that its enterprise customers will remain faithful to its platform. Research In Motion Ltd (NASDAQ:BBRY)’s disastrous first quarter numbers, however, extinguished that final hope for many investors.

A first quarter failure

For the first quarter of fiscal 2014, BlackBerry reported an adjusted loss of $0.13 per share, or $67 million, an improvement from the loss of $518 million it reported in the prior year quarter. Analysts, however, had expected a profit of $0.07 per share. Revenue rose 15% to $3.1 billion, but also missed the consensus estimate of $3.4 billion.

Research In Motion Ltd (NASDAQ:BBRY)’s smartphone sales dwindled to 6.8 million shipments during the quarter, with only 2.72 million BlackBerry 10 (BB10) units shipped. This means that Microsoft Corporation (NASDAQ:MSFT)’s Windows Phone, which shipped 7 million units last quarter, is now the third largest smartphone platform after Android and iOS, which respectively command global market shares of 75% and 17%. Simply look at these first quarter global shipment figures to grasp how bleak BlackBerry’s future looks.

Mobile OS 1Q13 Shipments (millions) 1Q13 Market Share 1Q12 Shipments (millions) 1Q12 Market Share Y-O-Y Change
Android 162.1 75.0% 90.3 59.1% +79.5%
iOS 37.4 17.3% 35.1 23.0% +6.6%
Windows Phone 7.0 3.2% 3.0 2.0% +133.3%
BlackBerry OS 6.3 2.9% 9.7 6.4% -35.1%
Linux 2.1 1.0% 3.6 2.4% -41.7%
Symbian 1.2 0.6% 10.4 6.8% -88.5%

Source: IDC, May 2013 figures (released prior to BlackBerry’s 1Q14 earnings announcement)

BB10 was intended to be the company’s comeback platform. Research In Motion Ltd (NASDAQ:BBRY) bulls believed that many BlackBerry users would buy its two new BB10 smartphones, the full touch-screen Z10 and the Q10, which features a traditional QWERTY keyboard. Sadly, neither the Z10 nor the Q10 appear to have attracted much of a following, indicating that many Blackberry users have since moved on to Android, iOS or Windows phones.

Research In Motion Ltd (NASDAQ:BBRY) also remained silent regarding the growth of its total global subscriber base. Last quarter, the company reported that it had 76 million global subscribers, down sequentially from 79 million users in the previous quarter. However, BlackBerry’s silence this quarter about its global subscriber base suggests that it may have lost far more subscribers than anticipated.

BlackBerry’s pain is Nokia’s gain

Besides Android and iOS, the only growing mobile operating system is Windows Phone. 80% of Windows Phones are currently manufactured by Nokia Corporation (ADR) (NYSE:NOK), with the remainder produced by HTC and Samsung. Once Nokia finally discontinues Symbian this summer, many Symbian users in emerging markets will likely upgrade to lower-end Nokia Windows Phones, such as the Lumia 520. Therefore, Nokia could claim twice the shipment volume and market share as BlackBerry later this year – a firm testament to the success of CEO Stephen Elop’s eleventh-hour efforts to save the ailing Finnish handset maker.

Although BlackBerry is attempting to throttle Nokia’s growth in emerging markets with its lower-end Q5 smartphone, it may be too little, too late. Nokia has already made a mark in India and other markets with the Asha 210, which features a BlackBerry-style QWERTY keyboard, and the Asha 510, a low-end touch screen smartphone. BlackBerry won’t release the Q5 until later this summer, giving Nokia a few more months to build up its market share in these markets. The release of the Q5 is a humbling move from BlackBerry, which has traditionally sold higher-end devices to enterprise customers.

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