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Analyst: New BlackBerries not yet ripe

A financial analyst cuts his outlook for Research In Motion, saying the company will take a hit as wireless carriers delay rolling out the next generation of its handheld.

    A financial analyst on Tuesday cut his outlook for Research In Motion, saying the company will take a hit as wireless carriers delay rolling out the next generation of its BlackBerry handheld.

    BMO Nesbitt Burns analyst Ray Sharma said that a check of 15 of RIM's major carrier partners shows a number of problems that could hamper early sales of the new BlackBerry, which runs on new GPRS (General Packet Radio Service) networks. The new networks allow faster data rates for the BlackBerry, as well as the ability to make phone calls.

    RIM has announced a flurry of deals with carriers to eventually offer the new device, which RIM unveiled in March. However, GPRS networks have been slow to get up and running, posing a challenge for RIM and other device makers.

    In addition to the readiness of the networks, Sharma pointed to the challenges of marketing the BlackBerry, which is made up of not only the devices, but also the server software, that allows always-on access to corporate e-mail. The report also pointed to the fact that carriers are still figuring out how to price data services for their new networks, which adds uncertainty for customers who have grown accustomed to the original BlackBerry and its $40 monthly fee for unlimited e-mail use.

    As a result of all the issues, Sharma cut his fiscal 2003 sales estimate by $35 million, to $370 million, and predicted a loss of 45 cents per share, wider than his earlier 20 cent per share estimate. Sharma also cut his price target on the stock to $24 from $30.

    A RIM representative was not immediately available for comment on the report.

    Shares of RIM were trading Tuesday at $15.82, down 66 cents, or 4 percent.

    In particular, Sharma singled out issues with RIM and AT&T Wireless. Sharma said that AT&T could struggle to sell the BlackBerry until it has its next-generation network up across the country, which Sharma said is not likely until late this year or early next year.

    An AT&T Wireless representative said the carrier is still on track to launch the BlackBerry by the end of June.

    In April, RIM reported earnings that matched analysts' estimates, but the company also cut its outlook for the current and future quarters.

    "Carrier rollouts of GPRS continue to take longer than expected," RIM co-CEO Jim Balsillie told analysts at the time.

    The company is making progress on bringing the BlackBerry to other next-generation networks beyond GPRS, Sharma said.

    Sprint PCS, which is not an announced RIM customer, is expected to launch a BlackBerry that runs on its next-generation CDMA 1xRTT network, Sharma said. And 14 other vendors are likely to be part of an August launch by Sprint PCS, Sharma said. Also, RIM is on track for a fall launch of a BlackBerry running on Nextel Communications' network, according to Sharma.