MONTREAL, Que. - The BlackBerry faces more competition in the consumer market, especially in North America, and it's entry into China will have challenges, analysts say.
Fresh from a gain of more than 10 per cent on Friday and after beating profit expectations, Research In Motion (TSX:RIM) faced questions about if it can maintain such growth.
Pacific Crest analyst James Faucette believes the company's 2010 financial year could be RIM's earnings peak.
"We believe that Research In Motion could face an uphill battle to maintain its recent breakneck growth," Faucette wrote in a research note.
PC Magazine analyst Sascha Segan said BlackBerrys are starting to look a bit dull and "definitely need a facelift" to appeal to more consumers.
"RIM's devices are popular, reliable, successful, but they've had less and less mind share over the past six months as the iPhone and Android have really grown as phenomena," Segan said.
Google's Android operating system can be modified and customized by developers for different mobile phone companies and is found in smartphones made by Samsung, HTC and LG.
"At the very least, making BlackBerrys cost the same as other mid-range smartphones on a monthly basis is critical to maintaining consumer market share," said Segan, managing editor of mobile at PCMag Digital Network in New York.
He noted the BlackBerry Pearl made RIM a hit with consumers four years ago and RIM needs another device to resonate like that with the buying public.
For its financial results, RIM said it earned US$628.4 million or $1.10 per diluted share for the quarter ended Nov. 30. That compared with a profit of $396.3 million or 69 cents per diluted share a year ago.
The company handily beat analyst estimates for the quarter, ended Nov. 28. According to Thomson Reuters, the average analyst estimate had been for earnings of $1.04 per share and $3.78 billion in revenue.
Faucette said RIM has effectively stopped growing at the high-end of the market in the United States.
That places increasing importance on growing in international markets and selling at the lower end, said Faucette, wireless communications analyst at the Oregon-based firm.
UBS Investment Research said RIM's results have alleviated "most bearish fears" but there will be new devices and potential pricing pressure from smartphone competitor Palm.
UBS titled its note on Research In Motion's third-quarter results: "Round 1: RIM; A tougher Round 2?"
Although co-CEO Jim Balsillie said China represents a large, new market for the BlackBerry, some analysts were skeptical.
Balsillie said Thursday that RIM is exploring opportunities to manufacture and conduct R & D activities in China.
UBS analyst Phillip Huang said his expectations are conservative for RIM in China, given its distribution and cultural challenges.
Pacific Crest's Faucette added: "We estimate that the addressable market for high-end smartphones in China is only 10 million to 16 million people.
But Segan said RIM's strength is putting devices on "odd ball" networks and that makes the company a good fit for China and India, which have all kinds of networks.
Segan said RIM doesn't have to sell high-end BlackBerrys in those countries.
"They just have to get products in at prices that will appeal to the middle classes of China and India."
Piper Jaffray analyst Michael Walkley said his concerns remain that increasing smartphone competition will impact higher-end sales in North America.
However, Walkley said he underestimated international demand for the BlackBerry Curve 8520, an entry-level smartphone.
"We believe RIM will face intensifying competition at key North American carriers during 2010," Walkley wrote in a note.
He said he'll monitor how the BlackBerry 8520 will sell to determine if it will "offset potentially declining" high-end North American sales due to increasing competition.
Shares in the Waterloo, Ont., company closed at $73.92, up $6.87 or more than 10 per cent, Friday on the Toronto Stock Exchange.