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Risks Abound for Research In Motion: Analyst

Stocks in this article: RIMM AAPL GOOG

NEW YORK ( TheStreet) -- Every once in a while, a bear needs to roar.

Research In Motion (RIMM) is slated to report its fiscal fourth-quarter results this coming Thursday, and few on Wall Street are expecting much from the troubled BlackBerry maker. Still Citigroup analyst Jim Suva decided to distinguish himself on Friday by detailing a multitude of reasons he believes that things are bound to get worse for the company.

"We believe RIMM's multiple challenges will lead to a combination of share loss in the smartphone market, gross margin compression, higher operating expenses, and EPS that will decline over the next couple of years," he wrote in a note to clients on Friday. "We reiterate our Sell rating. If we are correct with our view that future EPS continues to move lower as time progresses that would imply target prices continue to move lower as time progresses."

Among Suva's chief concerns is that RIM is at risk of missing the back-to-school selling season due to delays in its next QNX-based BlackBerry product launch. On Friday, the company said it plans to distribute prototypes of the BlackBerry 10, its next-generation smartphone, in May but didn't offer any update on when the device would be street ready beyond the prior second half of the year timetable.

"We view this the second-half launch as incremental risk for carrier certification as well as a large new product gap that in our view may cause RIMM to miss back to school selling season in 2012 as products need to be shipped to carriers in July/early August," he wrote.

The company's Playbook tablet product, which has been, to put it mildly, overshadowed by Apple's iPad, is also an albatross, according to Suva, as he believes RIM can't ditch it "because the QNX language is the future of the company which developers & enterprises need to work with."

The Playbook was RIM's first product with an operating system based on the technology it acquired in its deal for QNX Software in 2010. The company was forced to record a pre-tax inventory writedown of $485 million in the third quarter in order to increase promotional activity as it sold just 150,000 Playbooks in the third quarter. For comparison, Apple announced this week that it sold 3 million units of the new iPad in its first weekend of retail availability.

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