Jefferies has downgraded its rating on shares of Research In Motion Ltd. (NASDAQ: RIMM) to underperform from hold due to lackluster sell-through competition and valuation, while maintaining its price target at $25.

Our checks and Quarterly Handset Survey indicate: New BlackBerry OS 7 phone sell-in okay, but sell-through is lackluster; Weak sell-through of older models; Patents/subs reflected in valuation; QNX handsets are being rushed; New low-cost iPhone and low-end Android phones pressuring RIM in mid-range and low-end, respectively, said Peter Misek, an analyst at Jefferies.

Misek believes sell-in of new BlackBerry OS 7 phones was just okay due to carriers' lukewarm response, and sales trends for older models which continued to deteriorate. For fiscal second quarter, he estimates $4.4 billion/$0.77 (Street predicts $4.5 billion/$0.87), and expects about 12 million handset units to be shipped.

For fiscal third quarter, he maintained his below-consensus estimates of $4.8 billion/$0.92 (Street estimates $5.3 billion/$1.38) as follow-up orders from retailers and carriers for BlackBerry OS 7 phones will likely be underwhelming and RIM continues to lose share in developing markets.

As a result, he believes RIM could guide fiscal third quarter to 14 million to 15 million units range (his estimate at 13 million, while Street predicts about 15 million) but says actual shipments could fall short.

Stripped-down QNX phone could be launched in calendar first quarter, in time for International Consumer Electronics Show (CES) in January and Mobile World Congress in February. Based on Misek's checks, he believes the phone is being rushed and features are being stripped.

Most importantly, the integration of BES/BIS email/calendar is proving difficult, and he believes a QNX phone without these would be a disaster. Alternatively, RIM might launch an incremental BlackBerry OS update (OS 7.5) in the first half of 2012 followed by a full QNX phone in the second half.

He believes that a $300-iPhone and less than $150-Android phone from Huawei and ZTE to be launched this fall and pressure RIM in the mid-range and low-end.

He sees risk to fiscal fourth quarter and fiscal first quarter unless RIM is unexpectedly able to complete the QNX BES/BIS integration in time. His estimates remain well below the Street's for fiscal 2013 at $3.21 (Street estimates at $5.20).

BlackBerry OS 7 sell-in bridges the gap until QNX phones in calendar first quarter with a valuation floor from patents & subs. We believe just sell-in will not be enough through year-end, a calendar first quarter QNX phone will likely be stripped down, and that the liquidation value is capped at $21, said Misek.

RIM stock closed Thursday's regular trading down 1.85 percent at $31.31 on the NASDAQ Stock Market, while in the after-hours the stock rose 0.48 percent to $31.46.