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BlackBerry maker Research in Motion (RIM-T) has talked a big game about its revamped operating system, with the company’s top executives calling it a game-changer for the smartphone market.
But one analyst says that while the operating system -- called BB10 -- is a marked improvement over RIM’s previous offerings, it still falls short of Apple’s iPhone and is only “equal” to Google’s Android phones.
As a result, Jefferies analyst Peter Misek says BB10 phones won’t disrupt the dominance of Apple and Google in the smartphone wars and RIM’s best option would be to sign a licensing agreement with Samsung.
“Given recent management comments in the press, it now appears that RIM is realizing what Wall Street has been saying for some time: they are a subscale manufacturer and desperately need a partner,” he says in a recent note to clients. “We believe RIM is attempting to revive discussions with Samsung regarding a BB10 licensing deal.”
RIM shares surged more than ten percent at one point because of the report.
Misek says that while Samsung is currently enjoying a good run in the smartphone market, the experiences of Nokia and Motorola show that such good fortune can quickly evaporate.
“Samsung has leveraged its scale, its vertical hardware integration, and Google’s Android operating system to attain its current position, but the company recognizes the increasing importance of software and the danger in not owning their software,” he says.
Licensing RIM’s new operating system would offer Samsung insurance against moves by either Google or Microsoft to block their operating systems from competitive handset makers, as well as bring security features that are currently lacking on other phones.
And it’s not the first time Samsung has considered signing a deal with RIM, Misek says.
“Our checks indicate that Samsung was interested in licensing BB10 at the end of 2011, but that RIM’s management indecisions led to a breaking off of talks. When RIM’s new management reinitiated talks, we think RIM’s weakened positioned and the later timeframe led Samsung to delay any decisions until after the launch of BB10,” he says.
Misek also says the problems facing RIM show no sign of abating, as he forecasts an18-percent decline in handset sales and a five-percent drop in average selling price in the current quarter.
“The fundamentals are not good and we think they could lose hundreds of millions of dollars in August,” he tells BNN.
“Their management team and board really dropped the ball earlier this year, they had an opportunity we think to license the operating system, they had an opportunity to strike partnership deals and they decided to wait and go it alone and said they wanted to match Apple. We think that was a massive mistake and now they are paying for it and the board is probably going to have to come up with a mea culpa and license the operating system.”
In its most recent quarterly earnings the company announced a $192-million loss, or 37 cents per share. Revenue fell 33 percent to $2.81 billion. It also announced a further 5,000 job cuts -- backtracking from earlier claims made by CEO Heins on BNN that there would be no more layoffs.
The stock plunged 20 percent in the wake of the earnings announcement and many analysts began ramping up their calls that the company needs to sell parts of its business if it wants to survive.
RIM has also repeatedly pushed back the launch date of the new operating system. The company originally said BB10 would be released in 2012, but recently moved the date to the first quarter of 2013.