After a big bout of Research In Motion ( RIMM) sickness last time around, investors are hoping for a little more stability in the BlackBerry-maker's more recent quarterly performance. RIM reports earnings for the February quarter after the market closes Thursday, and analysts are expecting far less turbulence. At the center of this storm are gross margins. RIM's shift from its high-spending business-user focus to a broader, costlier consumer smartphone market has crushed margins. In the span of a half year, RIM's gross margins narrowed to 40% from the 50.7%. But analysts at RBC and BMO Capital predict that the dramatic margin erosion has stopped and have probably stabilized at 40%. This will be good news for the Wall Street crowd that's expecting adjusted earnings of 84 cents a share on $3.4 billion in sales. Looking ahead at the May quarter, the Street expects pro forma earnings of 83 cents on $3.35 billion in sales, according to Yahoo! Finance. RBC analyst Mike Abramsky is more optimistic. He expects "healthy guidance," assuming all goes well with new products. Abramsky calls for 86 cents of adjusted profit on $3.5 billion in sales, with a stable gross margin outlook. As TheStreet.com first reported, RIM's hotly anticipated BlackBerry Niagara is due at Verizon ( VZ) in May. This sleeker version of the popular Curve will be a welcome addition to the BlackBerry Storm and Verizon's otherwise weak phone lineup. But even as the near-term picture improves, it's the longer-range prospects that have others concerned.
Last week, JPMorgan put a sell rating on RIM on fears that a global economic slowdown will continue to chip away even at the hot smartphone segment of the market. RIM's in for a bruising in the bigger market, where Nokia ( NOK) and Apple ( AAPL) rivals will force the BlackBerry to spend even more on research and product development. This while phone sales slow worldwide as the recession deepens and fewer new markets can be found, according to JPMorgan. But for now, with the new BlackBerry App store and signs of stabilization afoot, RIM may carry the day.