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Research in Motion’s (RIMM) (now known as BlackBerry) recent launch of BB10 and its decision to re-brand itself as BlackBerry seems to not have gone down too well with investors. The stock has plummeted more than 25% this week alone as the high optimism that had built up ahead of the BB10 launch fizzled after it became known that the latest BB10 devices will not be launched in the U.S. market until mid-March at least. RIM’s stock is still up more than 100% since late-September when it had set a low of about $6.30 per share after a disappointing Q2 release. The roller-coaster ride that RIM has seen over the past few months goes to show the kind of uncertainty that exists around the success of BB10, and the tough road ahead as it looks to manage a turnaround in the face of increasing competition from not only smartphone bigwigs Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF) but also a resurgent Nokia (NYSE:NOK).

Most of the optimism that has buoyed RIM recently is due to a growing confidence that the company is receiving the all-important carrier support for its new BB10 devices. However, while BB10 is being tested out by several carriers worldwide, it remains to be seen how much marketing weight they are going to put behind the new OS given iOS and Android’s popularity and the Lumia’s strong holiday quarter with WP8. The initial reviews of the new platform have been positive and the company is looking to launch six devices at various price points this year to generate more customer and developer interest. But, in a smartphone market largely dominated by the iOS and Android, carving out a niche for BB10 will be increasingly tough.

Keeping this in view, we maintain our $12 price estimate for RIM’ stock, about 10% below the current market price. An upside/downside to our price estimate completely hinges on the kind of success and market share gains that BB10 sees in the coming months.

See our complete analysis for RIM stock here

RIM’s huge subscriber base is valuable

There is no questioning the fact that RIM has fallen on bad times of late. The struggling smartphone maker has seen its BlackBerry unit sales fall year-over-year for the last six consecutive quarters. Last quarter saw RIM ship only 6.9 million BlackBerries, a precipitous drop of more than 50% y-o-y and about 7% q-o-q.

However, while sales in the developed markets of the U.S., Canada and the U.K. continue to decline steeply, the sustained popularity of BBM service in international markets has helped RIM defend its subscriber base quite well. It is on the back of its about 80 million strong subscriber base that RIM has been able to continue generating cash through steady high-margin carrier fees despite reporting net losses for three quarters straight.

Moreover, with BB nowhere near its peaks of customer appeal, RIM will be primarily looking to get this installed base to upgrade to BB10 initially. At the same time, RIM will bank on the push e-mail and BBM service revenues from existing subscribers to tide over this difficult transition period. The company has said that it is looking to leverage the security strength of BlackBerry services that governments and enterprises around the world have come to rely on.

Push Email Division Key

We believe the BlackBerry services, which include push e-mail and BBM, are unique value propositions for RIM’s customers, and the company is doing the right thing by realigning its focus on this segment as it negotiates the BB10 transition. Our estimates show that this is RIM’s most valuable division currently, accounting for almost 40% of our price estimate for the stock.

But a carrier push to reduce fees as well as a loss of more enterprise customers to rival platforms, as the bring your own device (BYOD) movement becomes more popular, could hinder RIM’s strategic moves to boost revenues from the services division. In addition, the new BB10 devices will not be supported by the existing enterprise servers (BES), potentially making the BES 10 upgrade process costlier and complicated, thereby reducing RIM’s chances of pushing BB10 into the enterprise base. (see BES 10 Fragmentation Increases The Risk For RIM)

A lot depends on BB10′s reception in the market, and RIM faces an increasingly uphill battle against the two well-entrenched mobile ecosystems of the iOS and Android. The competitive pressures will come not only from potential customers deciding to purchase rival smartphones, but also from developers unwilling to devote their resources to a platform with questionable chances of taking off.

Although we do not expect RIM to ever reach the heights it once commanded in the smartphone market, if RIM does manage to make BB10 a strong smartphone OS, it could still claw its way back into the market and continue to generate cash from its enterprise and retail niche. RIM’s mobile market share has plummeted from over 3% in 2011 to an expected 1.8% in 2012. However, if BB10′s launch helps RIM win market share back to over 3% by the end of our forecast period, there could be 30% upside to our price estimate.

Disclosure: No positions

Source: Research In Motion's BB10 Launch Does Little To Clear Uncertainty