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BlackBerry Losing Market Share, But Brand Is Strong

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Research in Motion, which was shy of analysts' expectations, isn't a victim of smartphone competition.

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When I hear the word BlackBerry, several words come to mind.

Dependable. Steady. Reliable.

But never sexy.

And for that reason, it's becoming increasingly common for investors, the business media, and the tech blogosphere to write off Research in Motion (RIMM), which reported its fourth-quarter results after the close Wednesday.

For the quarter, Research in Motion reported numbers that were shy of analysts' expectations due to a key customer's inventory reduction, which is driving the stock down in extended hours. Expectations were high going into the quarter as Research in Motion came off a streak of four earnings beats, and with multiple analysts raising earnings estimates ahead of the quarter.

However, the company offered a first-quarter profit outlook that exceeded Wall Street's consensus forecast by a comfortable margin. Research in Motion's Storm and Curve products are selling notably well due to wireless carriers' promotional efforts, and Research in Motion CEO Jim Balsillie offered a bullish outlook for the company's fiscal 2011 phone lineup.

In his own words, "If you saw the roadmap, you'd be blown away."

Whether that statement holds any water remains to be seen. But one thing we do know is that Research in Motion's line of BlackBerry devices is ceding some market share to the Apple (AAPL) iPhone and the growing wave of Google-Android (GOOG) powered devices like the Motorola (MOT) Droid. What's more is that Microsoft (MSFT) is rolling out Windows Phone 7 this year, and will further crowd a highly competitive market.

But, and this is a big but, the bears are ignoring a major mitigating factor here. The smartphone market is growing, and Research in Motion is an all-smartphone company. Research in Motion may have more than 40% of the smartphone market and is thus bound to lose some share as competition increases, but it still has less than 5% of the broader mobile-phone market.

As I stated above, there is nothing sexy about a BlackBerry. That's okay, because BlackBerry has a distinct brand identity that fulfills a large number of end users' needs. Corporate IT departments familiar with Research in Motion's solutions aren't going to stop handing out BlackBerrys any time soon, and there will always be consumers that don't need the absolute latest, greatest, and snazziest phones on the market. Some people just want a cheap phone that does email.

Don't take my word for it -- just look at the numbers. Research in Motion's revenue number was below analysts' expectations, but it did grow by 18%. And its first-quarter revenue guidance implies a 27% gain over last year's number. That's a heck of a lot faster than what anyone's expecting out of the far-more-exciting Apple and Google.

Call me crazy, but Research in Motion is doing okay for a company that's losing market share.

I've been something of a Negative Nancy when it comes to the non-Apple portion of the smartphone market, but there are room for multiple players here -- particularly ones with distinctive branding. The real losers in the long-run will be manufacturers focused on look-alike phones running commodity operating systems and/or those with major legacy non-smartphone businesses.

Research in Motion isn't a victim -- it's just being forced to slide over and make some room.

In fact, I'm looking to buy.
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