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RIM has its head in the sand and is delusional..

Analysts had a field day on Friday after RIM released its less than stellar Q2 earnings on Thursday. When addressing its future prospects, RIM warned that its gross margins in the Q3 will drop another three percentage points to 47% and that a further decline is likely into 2010. Ouch! In a letter sent to clients, Charles Wolf of Needham & Co had the most scathing assessment of RIM:

In their conference call, management dismissed the notion that new competitors, most notably Apple’s iPhone 3G and new smartphones running on Google’s Android platform, would materially slow the growth in new subscriber activations. We continue to believe that the company has its head in the sand. Yes, the iPhone and Android phones will expand the market as they lure mobile phone users to smartphones. But we believe it’s delusional to think they won’t cut into BlackBerry sales as well, especially in the consumer market.

Did he just call RIM delusional and say they had their head in the sand? Yes, indeed he did. The not-so-rosy forecast for RIM had an effect as its stock fell 28% by days end. Yikes, looks like RIM is suffering the consequences of venturing out of their comfortable enterprise market and entering the highly competitive consumer market. Congratulations, RIM, you just got your first royal smackdown!

Disclosure: I’m eagerly awaiting the Storm on Verizon.