Pressure will stay on RIM after launch of BB10; 25 per cent of shares shorted

Pressure will remain on Research In Motion and its stock price even after launch of the new BlackBerry 10 operating system later this month as the market gauges consumer response to its new smartphones, analysts said Friday.

Will the new generation of BlackBerrys be attractive enough to get Android and iPhone users to switch off those devices and go over to RIM, asked telecom analyst Troy Crandall.

“That’s the huge question,” said Crandall, of Montreal-based MacDougall, MacDougall & MacTier.

The BlackBerry 10 is seen as a make-or-break product for Research In Motion (TSX:RIM).

“It’s their game to lose at this point,” Crandall said.

Shares in the RIM have been volatile for weeks in the leadup to the launch with wild swings amid share shorting.

Crandall said about 25 per cent of RIM’s 524 million shares outstanding on the Toronto Stock Exchange and New York’s Nasdaq are held by short sellers.

These investors have essentially bet against RIM’s success and lose money when the company’s stock goes up. But they can also help drive the stock price up by selling to cover their positions.

The share price bounced back sharply Friday as promotional materials for the new BlackBerrys leaked onto some technology blogs a day after three top U.S. cellphone carriers said they would support the new devices.

RIM shares were up almost 13 per cent, or $1.52, to close at $13.31 on the Toronto Stock Exchange on very heavy volume of more than 12.4 million shares.

Earlier Friday, shares in the Canadian smartphone maker traded at a low of $11.48 after U.K.-based carrier Vodafone said it had a technical problem that disrupted BlackBerry service to customers in Europe, Africa and the Middle East.

The disruption, while relatively minor in terms of the BlackBerry global subscriber base, came as RIM works to improve its image and just weeks before the launch of the BB10.

Vodafone said the issue was caused by a router error and that all service was being restored. “We apologize to customers for any inconvenience caused and we will provide updates as necessary,” Vodafone said in an emailed statement.

The Waterloo, Ont., smartphone maker has had several outages in the last couple of years, including one in October 2011 that knocked out service for millions of users.

RIM stock has traded between $6.10 and $18.23 over the past year.

BMO Capital Markets analyst Tim Long said he’s growing “more cautious” about RIM and has downgraded the stock to “underperform” from “market perform.”

“While BB10 should be a meaningful improvement, we are not expecting the new phones to stem market share losses,” Long said in a research note.

“We believe the stock will be driven by the reception and results of BB10 products over the next few months, which we don’t expect to be positive,” Long added.

BlackBerry’s U.S. market share has dropped to just 1.6 per cent, hurt by Apple Inc.’s iPhone, according to a recent report by Kantar Worldpanel ComTech.

Crandal said even if the BlackBerry 10 launch is successful, it doesn’t mean consumers will rush to buy RIM’s new smartphones.

“If they mess this up, I don’t think their customers will have much more patience,” he said of RIM.

RIM hasn’t disclosed when the BlackBerry 10 smartphones will hit shelves or how much they will cost, but is scheduled to unveil the new devices on Jan. 30 in New York.