By Philip Elmer-DeWitt
April 10, 2008

“It’s the software, stupid.”

That’s the take-home message of a research note sent to clients Wednesday by Needham & Co.’s Charlie Wolf, who initiated coverage of Research in Motion (RIMM) with an unenthusiastic “hold.”

While Wolf sees little risk to RIM’s grip on power users in corporations, he warns that the company’s recent growth spurt, driven largely by a successful run at the consumer market, may soon run into a roadblock.

“RIM quickly captured the pole position in the consumer market with the sleek Pearl,” he writes. By contrast, RIM’s major competitors, Motorola (MOT), Samsung, HTC and Palm (PALM), all stumbled, according to Wolf, “because they attempted to invade the consumer market using the Windows Mobile operating system, at best a difficult-to-use platform.”

All that could change, he says, when Apple’s (AAPL) iPhone software developers kit (with enterprise support) comes out of beta in June and Google’s (GOOG) Android system arrives later in the year.

“In contrast with BlackBerry’s comparatively primitive development platform, applications on the iPhone will be able to exploit the much more powerful Mac OS 10 operating system as well as the next-generation multimedia capabilities built into the phone that no competitor has come close to matching.”

Android could also pose a threat to RIM, but Wolf is less sanguine about Google’s software. “It’s way too early,” he says, “to declare the Android platform a success.”

Wolf’s 2009 forecast has RIM earning $4.05 per share on revenue of $10.2 billion, compared with earnings of $2.26 on revenues of $6.0 billion in 2008. In other circumstances that might sound like a solid “buy.” But RIM’s shares have been trading over $120 lately, which implies growth at a rate that Wolf fears the company might have trouble sustaining once it faces competition from iPhone 2.0 and the Android smartphones.

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