RIM's Motion Sickness

Solid results may not be enough to move the BlackBerry maker's stock.
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Shares of

Research In Motion

(RIMM)

have been stuck in a rut over the last year, a fact the company's second-quarter earnings may do little to change.

Wall Street expects that the company will post solid results Wednesday, showing better than 50% year-over-year growth in revenue and earnings. Usually those numbers would be cheered by the market.

But RIM is no ordinary company. Valued at more than 30 times the current-year earnings forecast, the BlackBerry maker already has big expectations priced into its stock.

And investors seem to be balancing any appreciation of the company's current market success with worries about obstacles to future growth.

"Fundamentally it's a great company," says Chyanne Fickes, a portfolio manager at Stone Asset Management who has held no stake in RIM's shares after selling off a long position earlier this year.

"But way too much news is coming out that won't sound good. ... All you're hearing now is about new competition coming down the pike," she says.

In its core business of providing wireless email devices, servers and services, RIM has so far successfully fended off its rivals. But investors worry about the challenges on the horizon: stronger competition, the effects of a long-running patent dispute and the risk of market saturation.

Those fears appear to be corralling RIM's shares. RIM's stock has basically traded sideways over the past year, showing large gains. And in the year to date, the company's stock has performed even worse, trading down 6%.

Although investors seem to have cooled on RIM, Wall Street's sell-siders continue to expect big things from the company.

On average, analysts polled by Thomson First Call are expecting the company to post a profit of 61 cents a share for its just-completed August quarter on $488.7 million in sales. That forecast is slightly above the range RIM provided in June.

In the same quarter last year, RIM earned $70.6 million, or 36 cents a share, on $310.2 million in sales.

And analysts are expecting RIM to continue along that profitable path for the rest of this fiscal year. For the full fiscal year, analysts are looking for a profit of $2.52 a share on $2.07 billion in sales.

For all of last year, the company earned $213.4 million, or $1.09 a share, on $1.35 billion in sales.

Meanwhile, recent research data suggest that RIM continues to perform well. According to Gartner, a market research firm, RIM shipped 840,000 wireless handhelds in the second quarter, up 65% from the 510,000 units the company shipped in the same period a year earlier.

That gave the company 23% of the market for personal digital assistants, making it the No. 1 vendor worldwide, according to Gartner.

Despite the good numbers, though, analysts may be getting ahead of themselves. In recent quarters, RIM management has consistently cautioned analysts to lower their expectations for coming periods.

And even if the company posts strong results in the just-completed period, fears seem to be growing among investors about RIM's prospects further out.

One potentially important new threat came to light this week. After months of speculation,

Palm

(PALM)

announced Monday that next year it would release

a version of its flagship Treo smartphone that will run on

Microsoft's

(MSFT) - Get Report

Windows Mobile operating system.

The companies and analysts expect the new device to compete with RIM's own smartphones and BlackBerry pagers for corporate accounts.

RIM could also see stepped-up competition on the device front from handsets that use the

Symbian

operating system, which now dominates sales of high-end devices in Europe and Asia.

Device sales represent the lion's share of RIM's revenue, meaning the company could have a lot to lose if customers use rivals' devices -- even if they use them to connect to RIM's own software.

But the software side faces a growing threat as well.

Later this year, Microsoft expects to release an update to its popular Exchange email server program that will offer "push" email services similar to RIM's BlackBerry server software.

So far, the competition hasn't been able to slow RIM's growth, but investors worry about that changing. Even if RIM is able to maintain its market share, it may have to do so by cutting prices or through costly promotions, warns a buy-side analyst who asked not to be named. (The analyst follows RIM but the analyst's firm has no stake in the stock.)

Unfortunately for RIM, to get its stock moving again, the company needs to post better-than-expected revenue or earnings -- a tall order if it's having to hold the line on pricing.

"I have a hard time seeing where the upside's coming from," says the buy-side analyst.

And then there's the issue of the eventual size of the market. With seemingly every corporate executive, financial analyst and investment banker around the U.S. sporting a BlackBerry pager these days, some analysts wonder just how many customers are left who want and will pay for on-demand wireless email.

Although RIM has been aggressively pushing into international markets, the growth from those markets might well be offset by declining demand in North America. In the meantime, the company is still trying to show that its products will appeal to consumers as well as corporate big wigs.

"That the risk. It's big market, but not as big as people think. Going forward, I think the growth rate falls off a lot," adds the analyst.

While the company faces competitive and market challenges, perhaps the biggest problem is a lingering lawsuit. Patent holding company

NTP

won a judgment of infringement against RIM that was largely upheld by an appeals court last year.

Although RIM

seemingly settled the case in March, the agreement

fell apart in June and the case appears to be headed back to the courts.

With the NTP dispute still hanging around, investors worry that management is being distracted from other issues facing the company. Worse yet, in the eyes of some investors, RIM's management lost some of its credibility when the NTP settlement fell apart after the company implied that the dispute was all but over.

"You now have more questions than answers about this industry," says Scott Rothbort, president of LakeView Asset Management and a contributor to

TheStreet.com's

sister site

Street Insight

.

RIM "is a real wild card," adds Rothbort, who is short the stock.

Shares of RIM closed the regular session Tuesday down 16 cents to $77.43.