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A Quick Review of Research in Motion’s Q2 2011 Earnings Announcement
Below are my observations of RIM’s most recent earnings announcement,
as well as my historical opinion and analysis. Many heard very bullish
pronouncements from management and automatically assumed I was incorrect
in my outlook but if one were to do so one would have failed to “read
the fine print” in management’s outlook. I have made a video which goes
into my opinion in depth, as well as a few highlights which I will
include directly in this posts. I recommend watching the videos in full
screen mode, in HD in order to read the PowerPoint slides in the
background. For subscribers, we will update our assumptions with
portions of management’s upgraded guidance, but please keep in mind that
they underperformed their guidance in key areas from last quarter, the
very same areas where we suspected they would show relative weakness.
They, of course, outperformed in other areas but I feel the thesis (in
general) remains the same.
The videos below are experiments in delivering content through the YouTube format. The production is, quite admittedly, cheesy :-),
but keep in mind it was an experiment and a test run with the
production software. I will probably deliver more content in this
fashion (sans the cheesiness) in the future, with higher level of
polish.
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 09:58 |
Highlights of interest from the conference call (click any graphic to expand):
RIM Has Strong Global Diversification, But Still Cannot Escape Slowing Subscriber Growth!
BlackBerries are available through over 565 distribution partners in
approx. 175 international markets. Approx. 52% of revenue was generated
outside the US & over 45% of BlackBerry subscribers are outside of
North America. Despite this, net subscriber growth is still slipping!
Devices Shipped Slightly Surpassed Our Assumptions – a marked
positive, but have not come anywhere near matching that of the growth of
the market, lagging by nearly 1/3rd
Device revenue was slightly worse than we assumed but the general story has not changed.
The 2nd quarter rev. growth for 4 yrs running shows substantial growth degradation, despite a rapidly growing smart phone market
Average Selling Price Trending Down, with a Very Marginal Reprieve
RIM has actually forecast a higher ASP for next quarter as the Torch sales kick in.
The Forecast of Higher ASPs Looks Dubious to Us, Anyway
As excerpted from As I Have Anticipated, There is Absolutely No Fire in the Torch, Except for the One That’s Frying RIMM’s Share Price:
The iPhone is selling more than 10x times the rate of Torch (if the
sell side estimates quoted in the article are to be believed) and
Androids are outselling the iPhone. These sales are at full price
(between $199 and $299 , US) and the top of the line Androids and
iPhones are consistently sold out – at FULL PRICE! You literally have
to join a lottery to get an Evo, two months after launch. Ditto with
Droid X, and iPhone 4. Two weeks after the launch of the Torch,
retailers are ALREADY dropping the price, and doing so by a whopping
50%.
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The Increase in ASP “Argument” Apparently Looks Rather Dubious to Management As Well
From the conference call:”
Kulbinder Garcha – Credit Suisse: And then just as a follow-up Edel,
just – I just wanted to clarify on what you’re going to guide and what
you’re not going to guide on average selling prices and not report them
going forward or just not guide them and report them afterwards and the
same for net adds?
Edel Ebbs, RIM Managment: Yeah, same for both of them. So this will be the last time we’ll guide them. Next quarter is the last time we’ll report them.“
Where’s the Beef? Is RIM management failing to directly address the biggest question on every investor and analysts mind???
•What is interesting is that management had very little to say
about the stiff competition in its conference call. They spoke much
about marketing and launches, & elaborated on the
security/regulations issues with sovereign states. To be frank and fair
to RIM, any vendor that offers end to end security will face similar
issues, thus it is not RIM specific. The biggest threats, by far, are
Android and Apple!
about the stiff competition in its conference call. They spoke much
about marketing and launches, & elaborated on the
security/regulations issues with sovereign states. To be frank and fair
to RIM, any vendor that offers end to end security will face similar
issues, thus it is not RIM specific. The biggest threats, by far, are
Android and Apple!
The Subscriber Trend Is Still Negative
Thus far, I am still bearish on RIM’s future prospects outside of
riding market growth. RIM will benefit from an expanding market – but
less and less so as time goes on. That is, unless management can quickly
and significantly right the ship, but to date it has shown no
proclivity of being able to do so. It is my opinion that the management
should have pulled out all of the stops on the Blackberry Torch, and
made that device Best of Breed for the next generation of handsets,
materially leapfrogging what is available through Android and Apple, on a
hardware, software, and centralized server (to counter what Google can
make available through the cloud) basis.
Instead, it looks like the Torch is middling, at best when compared with other top of the line devices. See RIM Smart Phone Market Share, RIP?
The bearish outlook on RIM has proven to be profitable, to date.
Previous Research in Motion commentary
- BoomBustBlog Research Opinion Hits the Mainstream Media, Sort Of…
- As I Have Anticipated, There is Absolutely No Fire in the Torch, Except for the One That’s Frying RIMM’s Share Price
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- RIM Smart Phone Market Share, RIP?
- This Quarter Offers a Lot of Challenges for Smart Phone Vendors with Fruit in Their Names!
- Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion
- The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download
- As
Research in Motion Continues Its Inevitable Downward Descent In
Both Equity Value and Market Share, Investors Should Tweak Their
Assumptions Accordingly - The Blacker the Berry, the Smaller the Market Share?
Subscription content (click here to subscribe):
RIMM Forensic Analysis and Valuation – Professional & Institutional- RIMM Forensic Analysis and Valuation – Retail
RIMM Multivariate Valuation Model- Smartphone Market Model – Blog Download Version – all paying subscribers
- Mobile Operating System Market Share Model – all paying subscribers
More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars!
- There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
- The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
- An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
- Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
- This article should drive the point home: An iPhone 4 Recall Will Hurt Apple More By Opening Additional Opportunity for Android Devices Than Increased Expenses
- A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- RIM Smart Phone Market Share, RIP?
- Android is gaining preference as the long-term choice of application developers
- A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
- Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
- Apple on the Margin
- RIM Smart Phone Market Share, RIP?
- Motorola, the Company That INVENTED the Cellphone is Trying to Uninvent the iPad With Android
- Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space
- There
Goes Those Fancy eBook Aspirations from Apple, Barnes and
Noble, and Amazon: 100,000’s of FREE eBooks from the Public
Library - How
Google is Looking to Cut Apple’s Margin and How the Sell Side
of Wall Street Will Enable This Without Sheeple Investor’s
Having a Clue - Empirical Evidence of Android Eating Apple!
- More of the Android Onslaught: Increasing Handset Revenues and Growth
- Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion
- The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download
- advertisements -
Reggie, good info. You may also want to consider how pervasive BBM (their messenger client) is on campuses. Somehow they seem to have gotten a foothold among the 17-21 year crowd because Messenger is so well integrated.
You may have seen their new BBM-focused marketing, which indicates they know that this phenomenon is growing.
Not sure if there is any advantage of BBM over, say, GTalk, but the combination of hardware keyboards and BBM seems to have swamped the college scene. Kids don't like the delay/inaccuracy of software keyboards from what I've observed.
I just dropped my kid off to college and it appears as if the touch screen phones are the craze. I will take a more concerted look now that you have brought the subject up though.
"The point that many are missing is that these devices are no longer phones. They are full fledged mobile computers with a full coterie of telecomm capabilities embedded."
And for that reason, the next big data/ID theft hacking problem on the horizon.
Theft will be a constant. To be honest, even with all of the corporate computing gadgets around, the easiest and probably most prolific way to steal something is to slip a piece of paper in your pocket.
Push email is obsolete, RIMM is just a handset maker now theres nothing really cutting edge about it. Only thing RIMM has going for it is business already uses it. Then again, business also used to rely on mimoegraph machines too.
Reg,
no doubt. The torch is so similar to the palm...the apps are not even close to the apps you get from other phones....
thus the HUGE HUGE SHORT INTEREST IN THE STOCK...
ahhh..the rise and fall of tech. Tandy 2000 anyone???
The point that many are missing is that these devices are no longer phones. They are full fledged mobile computers with a full coterie of telecomm capabilities embedded. When looked at from this perspective, it is much easier to see where and how RIM is falling behind.
When one just looks at it from the perspective of being a phone with a few widgets and toys thrown in, then RIM's predicament doesn't seem as dire.
In a decade, I'm sure people will not even remember that the portable computing devices that nearly everyone relies upon was once considered, "just a phone".
RIMM not send you any cookies for Christmas last year?
Seriously, anyone who has been watching cell providers knows that the 'sticker' price of the phone has little to do with the overall cost of ownership.
RIM phones don't need the bandwidth-heavy data plans to anywhere near the same extent as the iPhone or the Android devices. Hence, they can be brought to market at a lower up-front price.
Growing device shipments by 45% is an impressive feat. Sure, its not 100% growth, but everyone knows that exponential functions aren't sustainable either.
Look buddy, this business is trading at barely over 7X tax paid-up earnings. Even if they don't manage to grow the business any further from today's levels in terms of subscribers and market penetration/selling price, its still a very undervalued stock. Maybe RIMM shouldn't be a $140 stock on its way to $280, but certainly, the current multiple makes it quite undervalued.
The BlackBerry also has rich integration opportunities with corporate IT networks through the BlackBerry Enterprise Server, whereas, it will be quite a while, if ever, before businesses 'trust' opening their VPN's to the wild west of Android or iPhone. Further, since its embedded hardware, the processor speed really doesn't matter.
Bottom line is that RIMM must be doing something right to have gained all those customers. They've gotten a lot of mileage out of selling phones with discrete keyboards, and I suspect they will continue to get that mileage for a long time to come.
Exactly. RIM plods on and sucks just like Microsoft sucks and continues to be the platform that most of the planet can communicate with the least expense in bandwidth and maximum versatility. I miss exactly nothing I care about and avoid impositions on my time (Indian time, as in Native American), run every program I need to use and access all web pages without delay. I run Windows 2000 Professional on a PC I built in Feb, 2004 and use a Virgin Mobile pay-per-use; I have no dog in this hunt. I am continually amused by volumes of research establishing beyond question the logical reason for any which thing, when the dark force of intuition moves along without noticing.
Actually, they didn't send me any cookies, but that is a subject for another discussion.
"RIM phones don't need the bandwidth-heavy data plans to anywhere near the same extent as the iPhone or the Android devices. Hence, they can be brought to market at a lower up-front price."
That still doesn't negate the fact that the phones are being discounted early on in their product cycle. It is a matter of supply and demand. The Torch will probably consume more bandwidth than all other blackberries because it is the most capable. The reason Blackberries consume less bandwidth is because they do more textual communication than the more multimedia prond iPhone and Androids. As RIM steps up the capability ladder, they will eat bandwidth too.
Growing device shipments by 45% is an impressive feat.
Not in a market that grew 50 to 60%! Blackberries are losing market share, and are not even treading water.
How do you figure processor speed doesn't matter. How about graphics performance, spreadsheet calculations, download speeds, etc.?
Its already happening. RIM is a fine company, but I don't feel management has been responsive to its environment nor its consumer base, and will pay the price if it can't right the ship.
"The reason Blackberries consume less bandwidth is because they do more textual communication than the more multimedia prond iPhone and Androids. As RIM steps up the capability ladder, they will eat bandwidth too."
Actually the RIMM phones are able to consume less 'bandwidth' because the BES servers are able to highly compress data that is transmitted to them. For instance, a .pdf attachment, for instance, may contain enough embedded graphics and text data to comfortably display on a 1920x1200 desktop, but the BES server is able to process and render a .pdf attachment, in email, down to a resolution that is perfectly adequate and matched for the BlackBerry.
No similar facility exists for the Android or the iPhones. They have to download the entire attachment, as it was originally sent.
How do you figure processor speed doesn't matter. How about graphics performance, spreadsheet calculations, download speeds, etc.?
Being that it is an embedded platform, the processor doesn't sit around and do a lot of extraneous tasks. As for download speeds, the capabilities of 3G or 4G can be saturated using processors that work at 1/3rd the clock rate. This isn't a PC where you have a very large high resolution screen, and huge and clunky layers of abstraction between the apps and the base OS to include in the CPU budget.
"Its already happening. RIM is a fine company, but I don't feel management has been responsive to its environment nor its consumer base, and will pay the price if it can't right the ship."
You've been badmouthing RIMM for the past year now, and many of your concerns have gone unfounded in terms of revenue. It may not be the most popular whizbang platform of the month, but the BlackBerries have a lot going for them, especially as managed devices.
So, by default you are only referring to the enterprise market since BES doesn't come into play in the consumer market. Does the server bandwidth savings you refer to justify an enterprise buying, maintaining/owning, servicing a Blackberry and the associated cellular network costs when when employees are willing to assume liability for all of those costs just to use their Apple and Android devices? Yes, believe it or not there is demand from endusers that are willing to assume said costs from the enterprise to NOT use a Blackberry.
Doesn't that speak volumes about Blackberries ultimate end user satisfaction? RIM managment assumed the Enterprise would be their ultimate customer when in realitiy it ended up being more of a combination of the enterprise, the employee and the consumer.
In addition, and to add on to the comment in the previous retort, Blackberries will consume more bandwidth as they become more capable. Video conferenings from handsets is bound to become more mainstream, and although few people send pdfs that were designed for 1900 x 1200 screen resolution, many do send and recieve photos that are assumed to be viewed at a minimum 680 or higher resulotion, short video clips, sound files, enncrypted office documents (which are harder to compress), etc.
Put that theory to a real world test and attempt to stream decent quality video (ex. Flash video) using a device with 1/3rd the clock rate of recent Android or iOS product and see if you have a satisfactory result. The graphics chips mean a lot to overall performance, as does the core CPU. I can verify this as an end user, and I have phones with much lower clock speeds that aren't nearly as responsive nor capable despite lower overhead in the OS.
That's probably becuase my concerns were more in line with market share and margin, with revenue coming up the rear. Revenue means less than profit, and both are near meaningless when discussing the present in terms of valuation. It is what is expected in the future that counts. To date, I don't see where I have been incorrect about RIM, but I will gladly admit it if you can show me.
It is not as if it is too late for the company to right its ship, but I don't see it happening judging by the last three (and the only thus far) touch screen devices it has released.