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Tickers in this Article: RIMM, AAPL, GOOG, VZ, MOT, PALM
Beaten down by fears that it now faces the prospect of lower future profitability, shares of email-on-the-go pioneer Research In Motion (Nasdaq:RIMM) have been showing signs of stabilizing recently. This follows a more than 22% valuation haircut since the company issued a third-quarter outlook that was decidedly underwhelming for both analysts and investors.

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Analyst Sentiments Swings To Negative On RIMM
The company's shares are now decidedly less pricey than they were a mere week ago, which has prompted at least one analyst to go against the tide of sell recommendations that have come from the research departments of major Wall Street brokers these days.

However, the company's fundamental prospects appear to be even more challenging as the fierce competitive battle for control of the smartphone market may become even more intense with the arrival of several new players. (For more on analyst expectations, be sure to read Analyst Recommendations: Do Sell Ratings Exist?)

Competition Gets Set To Really Heat Up
With the corporate mobile email market now fully served, the consumer market remains the only avenue of growth for RIMM. So far, getting a piece of this market has just involved going mano a mano with Apple (Nasdaq:AAPL) with its wildly popular iPhone. Now, RIMM faces the prospect of having to compete against a flood of new smartphones all based on the Android operating system championed by internet search giant Google (Nasdaq:GOOG).

Goggle's Smart Smartphone Play
Google recently paired major U.S. mobile telecom player Verizon (NYSE:VZ) to jointly develop Android-based products and services. With the deal now setting up one of the U.S.'s largest wireless network behind Android, smartphone makers like Motorola (NYSE:MOT) and Palm (Nasdaq:PALM) will be encouraged to make a whole host of Android-based phones.

Another big incentive is the fact that Goggle doesn't charge a license fee for Android. But that's a small price to pay for Google whose real win in this is the prospect of having millions of new small screens available to send targeted ad messages to. (See Dial Up Choice Telecom Stocks to learn about which metrics matter in the ever-changing telecom industry.)

RIMM's Warning Must Be Heeded
With competition heating up, it's clear to see why analysts have been giving thumbs down to RIMM. In addition to a slowdown in sales, the company's average selling price per unit is also likely to dip, thus lowering operating margins and profitability. The recent disappointing company guidance which prompted the shares' price plunge is a pretty clear indication of what to expect.

The Bottom Line
RIMM's stock price is lower, but that doesn't make it less expensive. While the company trades at about 16 times next year's earnings, those earnings expectations are likely to be revised significantly lower. Most analysts haven't yet updated their earnings models on RIMM to reflect the new fundamental reality facing the company.

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