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BlackBerry 10: RIM's make or break moment

Research in Motion (RIM-T) is facing a pivotal moment on Wednesday when the embattled, Waterloo-based smartphone maker will release its highly anticipated next generation of phones, known as BlackBerry 10. The move comes nearly two years -- and multiple delays -- after the last release of a new operating system and is being heralded by both RIM executives and analysts as the most comprehensive overhaul of the BlackBerry franchise in the company's history.

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Don't miss BNN.ca's coverage of the BlackBerry 10 launch, with a live blog from New York and Toronto, live streaming and instant analysis. Wednesday all day on BNN.ca. Click here for a preview.

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Whether the phone will transition the company back to the forefront of the mobile tech space or continue a trend that has seen it lose market share and fall behind sector leaders, Apple and Google, remains to be seen.

The launch of BlackBerry 10 will also be chief executive Thorsten Heins' first unveiling of new product since he took the reins of the company in January 2012, replacing its influential founders and long-time co-CEOs Jim Balsillie and Mike Lazaridis.

RIM has repeatedly told investors and consumers that it is betting everything on BlackBerry 10 and is confident the new phones will bring consumers back to the struggling franchise.

In an interview with BNN, Heins was adamant that the company has what it takes to make a comeback in the cutthroat smartphone market. He believes BlackBerry 10 is more than just another smartphone.

"It certainly is a very, very important inflection point for the company, because it's not just a new OS [operating system] or it's not just a new smartphone or a new product, because what we are building - or what have built actually - is a true mobile computing platform," he told BNN. "We are very confident that we will be successful not just in the smartphone market, I think we can take this into other regions and other domains in the mobile computing space as well."

RIM's chief marketing officer Frank Boulben -- appointed in May -- also believes BlackBerry 10 will be a game-changer, calling it a new "experience" for smartphone users.

"We intend to introduce a steep change in the smartphone experience device," Boulben told BNN at the company's annual shareholder meeting last summer. "We are building an entirely new platform."

Investors and the analyst community have warmed up to the company in recent months, pushing RIM's stock price as high as $18 in the run-up to the launch of BlackBerry 10 - nearly triple from its decade-low hit in September. Nevertheless, concerns about the future of the company resurfaced on Monday, pushing the stock down more than 7 percent.

A host of analysts have hiked their price targets and ratings on the stock.

"There is, we believe, huge potential for the platform and devices to bring people back to BlackBerry or draw entirely new users into the platform," Gus Papageorgiou, an analyst at Scotia Capital, said in a recent note to clients. He hiked his price target to $23 and raised his rating on the stock to "Sector Outperform."

RBC analyst Mark Sue called the unveiling of BlackBerry 10 a "leap from legacy BlackBerry to a modern platform." He recently raised his target price on RIM shares to $19 from $11.

But Sue warns while the introduction of the new products is a step forward for RIM, the company has a long way to go before it can once again consider itself a major force in the smartphone sector.

"Consumer and enterprise demand for BlackBerry 10 beyond diehard BlackBerry fans is unknown," Sue wrote in a recent report. "Over the last several years, RIM has lost significant share in the global smartphone market, which may be challenging to re-capture. RIM's enterprise users have been more resilient than consumers, but the trend towards bring-your-own- device (BYOD) has opened up the market to iPhone and Android."

BMO analyst Tim Long - one of the few to downgrade his price target and rating amid growing optimism among Street analysts - agrees, saying the introduction of BlackBerry 10 is not going to suddenly stem RIM's market share slide, which shrank to 1.4 percent in the lucrative U.S. market.

Long downgraded RIM shares to "Underperform" and cut his price target to $9 from $12.

He also believes the company's recent decision to change its business model for service revenues - where it charges consumers a monthly fee for access to its servers - could have a major impact on its "valuation." RIM is the only major carrier that continues to charge users a monthly fee for access to its secure servers.

But Jefferies analyst Peter Misek -- who recently changed his pessimistic outlook on RIM and upgraded his rating and price target on the stock to "Buy" and $19.50, respectively -- dismisses those concerns and says RIM might be moving into entirely new territory.

"RIM will enable corporate email on iPhones and Android devices. This change we believe is unknown or not well understood but is important," he said in a recent note to clients. RIM shares surged following news of Misek's upgrade.

Misek estimates that as many as 20 to 30 million of RIM's 79 million-strong subscriber base could make a move to purchase a BlackBerry 10 device.

"While RIM has lost a huge amount of momentum and share, we also believe that the core installed base has been starved for a legitimate upgrade opportunity," he says.

Many investors will also be curious to see what RIM decides to actually charge for its new devices. Because much of the company's growth in recent quarters has come from emerging markets -- where consumers are less able to afford expensive smartphones -- RIM may be limited in how high a price it can charge for BlackBerry 10 devices, which could add further pressure to its margins.

Scotia Capital analyst Papageorgiou believes the new phones will push the margins on RIM's hardware business - currently at about 2.8 percent - to 30.4 percent next year.

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