OTTAWA (Reuters) - Research In Motion will come under close scrutiny when it reports third-quarter financial results this week as investors look for more signs that rivals are denting the iron-clad franchise once enjoyed by its BlackBerry smartphone.
Analysts say RIM is unlikely to be badly bruised by competition in the quarter, which includes the important back-to-school period and part of the holiday shopping season. Even so, they say, it may be just a matter of time before damage becomes apparent.
"It's a high-growth market and there's room for multiple players," said Avian Securities analyst Matthew Thornton.
"But the question isn't whether RIM can grow. The question is how fast is their previous growth rate going to come down."
Analysts bullish on RIM's prospects say the company should benefit from product launches, smartphone market growth and recovering consumer electronics demand.
That said, the competition is also stepping up new product launches that could eventually take a toll on RIM's growth.
Particularly worrisome is Motorola's Droid phone. Verizon Wireless, a U.S. carrier that's an important RIM partner, launched a massive marketing campaign for the Droid smartphone for the holidays.
TD Newcrest analyst Chris Umiastowski estimated in a report that Verizon was RIM's biggest service provider, with 28 percent of sales, in the last quarter.
Also worrying is industry chatter that Verizon may start selling Apple's iPhone in 2010, he wrote.
The iPhone is increasing its reach, Thornton said. In Canada, for example, it is now available on three networks from one previously.
"Among investors, there clearly seems to be a lot more fear, uncertainty and doubt about RIM's future," Umiastowski wrote.
The Waterloo, Ontario-based company launched three new devices in the quarter, and that has likely helped it hold its ground, analysts said.
It appears that RIM's new devices were shipped well in advance of the U.S. Thanksgiving holiday, wrote Paradigm Capital analysts Barry Richards and Spencer Hill, and that could push results for the third-quarter, which ended November 28, to the high end of expectations.
On average, analysts expect RIM to report earnings per share of $1.04 in earnings and revenue of $3.79 billion, according to Thomson Reuters I/B/E/S. In the same period last year, RIM reported a profit of 69 cents a share on revenue of $2.78 billion.
For the fourth quarter, the average estimate is earnings per share of $1.12 and revenue of $4.1 billion.
"Expectations for RIM have come back to what I would call normalized levels," said Troy Crandall, a telecoms and technology analyst at MacDougall, MacDougall & MacTier.
"RIM should be able to meet these expectations and possibly, maybe even beat them."
RIM may benefit from tempered expectations for the third quarter after a disappointing forecast in the second quarter prompted analysts to chop estimates and fret over competition.
The company's stock has been in the dog house since second-quarter results in September, dropping about 23 percent.
"Everybody has gotten so down on RIM," said Duncan Stewart, analyst at DSAM Consulting in Toronto.
"There's a tremendous expectation that it will be a completely awful quarter and that means that, interestingly, if RIM manages to not burst into flames on the conference call the stock will probably go up."
RBC Capital Markets analyst Mike Abramsky wrote that he expects 16 new RIM devices in 2010, up from five in 2009.
For the fourth quarter, analysts will focus on forecasts for consumer additions, gross margins, revenue and profit.
"Looking out at Q4, we expect another solid quarter in what is traditionally one of the seasonal strongest for RIM," wrote Paradigm analysts Richards and Hill.
"We expect guidance for shipments and more importantly hardware average selling prices should put to rest market fears regarding RIM's competitive position and pricing."
Analysts will also closely watch gross margins, which have suffered with RIM's push into the lower-profit consumer market. Several analysts expect stable margins as RIM improves cost controls.
Reporting by Susan Taylor