RIM Faces a Critical Month As Apple Gets Tough

Apple (AAPL) CEO Steve Jobs made it quite clear what company he wants to upend: Research in Motion (RIMM). The next month will tell if RIM’s response will be enough to silence the recently chatty Jobs. In fact, some analysts speculate that the next month will dictate RIM’s performance in 2009 (and possibly beyond).

The issue: RIM is launching a bevy of devices–notably the Bold and Storm (right)–that will either fuel a product cycle that will launch the company into new markets. Or RIM will go for the brass ring and miss. There may be some wiggle room for an in-between performance, but RIM is clearly going for it. The big question: Will RIM’s arsenal of devices catapult the company and Blackberry platform to the next level?

The answer will depend on how RIM manages channel relationships, gets cozy with carriers and delivers devices that folks want. Thus far, the results are mixed. Piper Jaffray analyst T. Michael Walkley said that RIM’s October sales were mixed based on his channel checks. Walkley wrote in a research note Monday:

Our October checks indicate mixed RIM sales, as Curve sales remained strong at Verizon and Sprint but overall BlackBerry sales were softer than our expectations at AT&T (T) and T-Mobile.

What’s notable is that T-Mobile’s G1 phone with Google (GOOG) may be poaching BlackBerry sales. Simply put, RIM needs to get its handsets into carriers and into customers’ hands. At best, RIM is looking at a back loaded quarter.

In the meantime, RIM is laying the groundwork to garner some momentum.

To wit:

• Verizon Wireless (VZ) is putting some marketing might behind the Storm by advertising during key NFL games. The message: The Storm is coming and Verizon has the exclusive. That Verizon messaging is relatively new given that the carrier rarely gets the good handsets first (Sprint, T-Mobile and AT&T usually lead). The Storm is probably viewed as a way to maintain Verizon’s churn rates amid AT&T’s iPhone-fueled momentum. Just for the record: I’ll most likely get a Storm. Why? I’m a Verizon customer and they have a nice package where you can pay an extra $15 a month and turn your phone into a wireless card for your laptop. AT&T would require me to buy a card and a phone so the iPhone is a non-starter for me. Besides, I can get most of the iPhone fun I want with an iPod touch.
• RIM last week launched its “Application Storefront.” In other words, RIM is aggregating its apps. Sound familiar? It is. Apple as hits App Store.
• And the company is becoming more developer friendly launching new tools that hook into Microsoft’s Visual Studio, Eclipse and other platforms.

Add it up and you wind up with a nice showdown between RIM and Apple.

Last week, Jobs mentioned RIM seven times on Apple’s earnings conference call. On the call, it almost seemed like Jobs borrowed the playbook from Oracle (ORCL) CEO Larry Ellison, who will mention an archenemy like SAP an average of 10 times a call. Every once in a while, Ellison will tee off on another rival like Red Hat. But generally, it’s rare to mention a competitor by name that much.

Here’s what Jobs said:

I would like to now highlight two remarkable milestones resulting from iPhone’s outstanding performance last quarter. The first is that Apple beat RIM. In their most recent quarter, Research in Motion, or RIM, reported selling 6.1 million BlackBerry devices. Compared to our most recent quarter sales of 6.9 million iPhones, Apple outsold RIM last quarter and this is a milestone for us. RIM is a good company that makes good products and so it is surprising that after only 15 months in the market, we could outsell them in any quarter.

But even more remarkable is this — measured by revenues, Apple has become the world’s third-largest mobile phone supplier. I know this sounds crazy, but it’s true — as measured in revenues, not units, Apple has become the third largest mobile phone supplier. Let’s look at the ranking — Nokia is clearly number one at 12.7 billion; Samsung number two at 5.9 billion; Apple is number three at 4.6 billion; Sony Ericsson, number four at 4.2; LG, number five at 3.4 billion; Motorola, number six at 3.2; and RIM number seven at 2.1. Pretty amazing.

Now, both of these things, beating RIM in units and becoming the third largest mobile supplier in revenues are amazing feats but part of this was the result of expanding into over 50 countries and there’s no guarantee that sustained sales will equal initial sales. And who knows what the future results will be, given the worldwide economic slowdown but we actually outsold RIM last quarter and ranked as the third largest mobile phone supplier in revenues. Not bad for being in the market for only 15 months.

RIM and Apple are still very different, but each company is expanding on the other’s turf. RIM started enterprise and went consumer. Apple is trying to do the opposite. Whether RIM manages to expand significantly beyond its current market share remains to be seen, but it’s clear that RIM is entering a pivotal period.

Citi analyst Jim Suva said in a research note last week that RIM’s fate is “increasingly binary.” RIM will either succeed with its most ambitious product cycle to debate or it will fail. Suva wrote:

We see the next 30 - 45 days as a critical window for RIM products to reach carrier channels in time for holiday selling season, particularly as we see a rash of new products from all other major OEMs. In our view, investors are unsure if Bold will hit AT&T & if Storm will be at VZ (Verizon) in time/scale for holidays. We think RIM share outcome is increasingly binary – either a strongly positive near-term reaction to successful, timely launches, or further stock price declines if launch dates slip.

Our view is that the Bold and the Storm need to be launched at AT&T and Vodafone/Verizon, respectively, within the next 30- 45 days for RIM shares to see some relief…What remains to be seen is if RIM can successfully launch these critical new products in time for the holiday selling season, the outcome of which will be a major near-term share price driver, in our view. Longer term, investors need to gauge consumer uptake of these devices, the required subsidies/marketing spending to reach attractive price points and consumer adoption.

Suva also notes that RIM needs to hit its launch targets to build credibility. For instance, investors raised a few eyebrows as RIM outlined its outlook last quarter.

But more importantly, Suva has cooked up a decision tree for RIM. No pressure, but it illustrates the point. RIM has a busy month with some very high stakes involved. A few missteps and rest assured Apple will be yapping again and RIM will be explaining how its November quarter slipped away from it.

Here’s Suva’s probability tree (click to enlarge):

Bottom line: RIM future may ride on the success of its latest batch of products. It can’t afford to have execution issues.

Comments

[well:]

in the long run, both companies will do well.... appl even though not perfect makes wonderful products but for business rim is still the soultion, and the g1 is a little too late and a bit behind the loop, appl is way ahead of them

users who like the keyboard have the option of getting a bold or storm if their used to the touch screen, rim is way more secure, battery is removable, phones useable worldwide, they offer wonderful support and a wealth of business apps. even with all the poor economic news, with holidays approacing and new phones on the way we'll see a good run

2008 Oct 28 12:50 PM

[kris23:]

Apple's iPhone sales have to wane off eventually after the first influx of consumers now have them. I think in the long run, both of these companies will do well because they appeal to different target markets. While there is clearly some overlap, RIMM has positioned itself as the business professional smartphone while Apple appeals to a younger more hip crowd. Both will probably see a hard holiday season, but sentiment is becoming stronger for RIMM and I think the Storm is gonna be a great new product for them.

2008 Oct 28 12:57 PM

[Timeline St...:]

@1cpcp - Don't know what you mean in reference to RIM phones 'useable (sic) worldwide'. That implies that iPhone is perhaps not, but the experience that I just had in Europe is that iPhone is incredibly easy to use internationally. To begin, you can have it automatically dial international prefixes if you can never remember the calling protocol from different countries. Second, you can jump on most of the smartphone functions (browsing, e-mail, maps, app store, iTunes) from anyplace with a WiFi signal. So you can really selectively use the phone in a pretty affordable way if you turn off the data push and other bandwidth-eating functions.

My previous European phone experiences have either seen my Motorola CDMA phones unable to function, or my work-issued Blackberry unconfigured for international use. I know that that latter problem can be fixed, but other employees had it as well and it's not simple to fix - it actually requires enterprise IT support, which in the long run adds costs. That right there is an argument against RIM.

It's also a good thing that the Blackberry battery is removable, because in my (admittedly limited) experience you needed to do that periodically when the browser froze up while browsing or searching e-mail and you could not get it to shut down in any other way. Again, this was validated by other employees who had the same problem. The tech-savvy among us may say that's user error, but if the same error happens to multiple users that indicates a design flaw that should be corrected. iPhone is not without issues, but when you consider the breadth of functionality and the new technology, it's a pretty remarkable design.

Finally, regarding the holiday season, RIM makes it pretty difficult to see their holiday quarters vs. non-holiday quarters because of their non-standard fiscal year calendar and also their somewhat confusing lack of a quarterly update for the quarter that includes the holidays. I could have dug into it and back-calculated the holiday quarter, but anyway my suspicion is that because RIM is enterprise-oriented, that the holiday quarter does no differ markedly from others, in contrast to Apple which sees big upticks. So, I take issue with your last point that RIM will see a good run. I don't think so. I think that they have peaked, are in decline, and that RIM will end up being purchased on the cheap by a company (not Apple!) that can get anti-trust approval. Could even be an Asian company.

PS Larry, good article. The decision tree is a neat addition. Even with its 55% probability of RIM's decline, I still think it's overly optimistic. I would put it closer to 80%. The event chain is not in RIM's favor, and in the end, too many competitors are looking too good against them.

2008 Oct 28 01:22 PM

[Timeline St...:]

@Kris23 - What's your evidence that iPhone sales must wane? Most investors want good evidence to back up their theories, can you just say it and have it be so?

One must look not the remarkable numbers of iPhones that Apple has sold in a short time, but the number of people who STILL don't have an iPhone. Walk through an airport on a business travel day, for instance, and look at the sheer number of Blackberries that business travelers carry. It completely dwarfs the number of iPhones you'll see. Do you think that Apple is not going to figure out how to get iPhone (perhaps modified, enterprise-oriented) into those hands?

Did you read about how many countries the iPhone added in the last 2 months? Have a look at the Apple website: www.apple.com/iphone/c.../

Did you read about Rogers Wireless earnings in Canada? (biz.yahoo.com/cnw/0810...) They basically sold an iPhone to about 2.5% of the Canadian population in one quarter. How many countries will replay those figures as iPhone becomes a social phenomenon?

Stop into one of those stores that will be (questionably?) introducing the new Blackberries in time for the holidays. See what kind of lines and enthusiasm they generate, then have a look at the Apple Store.

In summary, I just can't buy your assessment. It doesn't have any support or validation amongst what I read and see.

2008 Oct 28 01:37 PM

[Timeline St...:]

@Kris23 - What's your evidence that iPhone sales must wane? Most investors want good evidence to back up their theories, can you just say it and have it be so?

One must look not the remarkable numbers of iPhones that Apple has sold in a short time, but the number of people who STILL don't have an iPhone. Walk through an airport on a business travel day, for instance, and look at the sheer number of Blackberries that business travelers carry. It completely dwarfs the number of iPhones you'll see. Do you think that Apple is not going to figure out how to get iPhone (perhaps modified, enterprise-oriented) into those hands?

Did you read about how many countries the iPhone added in the last 2 months? Have a look at the Apple website: www.apple.com/iphone/c.../

Did you read about Rogers Wireless earnings in Canada? (biz.yahoo.com/cnw/0810...) They basically sold an iPhone to about 2.5% of the Canadian population in one quarter. How many countries will replay those figures as iPhone becomes a social phenomenon?

Stop into one of those stores that will be (questionably?) introducing the new Blackberries in time for the holidays. See what kind of lines and enthusiasm they generate, then have a look at the Apple Store.

In summary, I just can't buy your assessment. It doesn't have any support or validation amongst what I read and see.

2008 Oct 28 01:37 PM

[davesmall:]

I read a detailed review of the soon to be released Blackberry Storm (on crackberry.com) and am still shaking my head over that one. Why would anyone buy an iPhone knock-off that's over a year late, has no WiFi, is bulky, has limited applications available, and costs more?

Apple is already selling more total units than RIMM. The gap will only widen and at a much faster rate. The iPhone 3G is an awesome device and Apple has an insurmountable techoogical lead.

2008 Oct 28 01:40 PM

[Timeline St...:]

Need to correct the math error on my earlier post. I said 2.5% of the Canadian population, should have been about 1%.

In any case, it's pretty good for a quarter.

2008 Oct 28 01:53 PM

[reagan:]

Its all about the software & RIMM can't hold a candle to Apple in that category. Apple will soon be the dominant player in this arena.

2008 Oct 28 07:02 PM

[bryanz:]

"I read a detailed review of the soon to be released Blackberry Storm (on crackberry.com) and am still shaking my head over that one. Why would anyone buy an iPhone knock-off that's over a year late, has no WiFi, is bulky, has limited applications available, and costs more?"

Maybe because they don't want to be tied to AT&T? I think the iPhone-knockoff comment is a little fanboyish, no? Just b/c something has a touchscreen now it's a knockoff? Nevermind the touchscreen actually provides haptic feedback and the ability to select without clicking...

I've also read detailed reviews and people who used the Storm were very excited and really enjoyed the experience.

And when you talk about software, the main apps I see people use on the iPhone are Google Maps, Facebook, the web browser, and rss readers... Blackberrys do have those. And to be honest, I could care less if my phone plays Super Monkey Ball. RIMM is working on its own App Store as well...

I think the innovation Apple has introduced into the market is beneficial for both companies because it will force them to compete with each other and eventually the consumer will win because of the much improved experience. That's why I own both companies.

I'm just sick and tired of all these people who have never actually held the device in their hands or had any experience with it and they're already bashing or dismissing it.

But me, I'll wait for the Javelin... BB 8900. I love my Curve and can't wait to see if the Javelin will be another winner from RIM

2008 Oct 29 04:12 AM

[Hayweed:]

If the storm is going to be so good then why not show it. The Verizon ad does not show the phone do anything. All the videos that show the browser loading all have an edit in the video which most likely means the browser is very slow or has problems loading. Apple does a great job on their commercials showing the phone being used. No one else does this. Why, the phones don't work properly.

When the iPhone came out, people said too expensive, not 3g, version one, closed system, no applications. Now the phone is cheap at $199, 3g, version 2, tons of applications and anyone can write software not just apple.

The storm will be expensive if not $199 or less, is not a world 3g phone, version one, closed system (no wifi - have fun using your phone in other countries which have wifi) , and no apps (apps coming in March???)

The G1 is cheaper than the iphone, only works 3g in 20 cities, open system (already a hack and virus problems may come soon), and apps are limited, version one.

So the previous poster is right. You can buy a great phone or you can buy a beta phone. That is why the iphone sold more phones than Rimm at an average of $600+ with subsidies and Rimm sold 800,000 less phones at an average of $350.

Lastly, looks like the flip is going to price at $150 with no 3g, the Bold will price around $300 - $350 and the Storm will price at ????. Appears at least in the US that the carriers do not see a need to provide as much subsidies on RImm. Guess that says it all. Not that big of a deal to their sales.

2008 Oct 29 08:52 AM

[brewer:]

RIM headed for "epic fail". Apple has the only real smart phone.

2008 Oct 29 09:48 AM

[Fremont Rea...:]

Apple will win the consumer market, because it's easy to use and remember it's an iPod with a phone. So all those iPod lovers who lover carrying around their music will love to have a single device to move to once they can afford it.

However, the iPhone is not a business phone, and because of secuirty and management issues. RIMM is not going away, they may not grow as fast as APPl, but they will continue to grow, and until AAPL comes out with a keyboard for the iPhone they'll have a distinct advantage over the iPhone.

When I'm searching for real estate online, it's way more efficient to use a keyboard.

2008 Oct 29 12:24 PM

[winindthedust:]

@lcpcp: Try an iPhone & then get back to me.

The iPhone is a platform, that becomes obviously clear, when you actually use it, then go back to something else. The iPhone is a hand held computer that happens to also be a phone.

As Jobs said, "RIM is a great company"... Apple is proud to mark their progress against RIM. Rim's Bold is a cheap iPhone knock-off, however.... there is not a true platform driving the hardware like the iPhone has. The Bold is a knee jerk attempt to get users that don't know any better... nothing more. This could back lash RIM, if business users try it, and get burned. In this case, going "consumer" is dangerous for RIM and actually cheapens and dilutes it's brand. On the other hand; since the iPhone is a platform that works well for both business, fun, gamers, and well, everyone... it brings the "it just works" functionality to phones. Easy sync, software updates, and applications.... their really is no comparison between the two companies.

Believe me, Apple is not concerned about RIM whatsoever... the only reason they bring up the name RIM & Blackberry is to attract the attention of business users that have the RIM blinders on.

It will take ten years before anyone else can get another mobile platform to stick (if at all). Microsoft tried and failed, so did Linux. Now we have Android. Rim's OS never really was a platform, they will need major re-engineering & capital to get up to OSX capability.

In the meantime, Apple will be constantly refining it's software, and upgrading it's hardware. You will see the power of the iPhone continue to amaze. People that have an iPhone will want to upgrade because of this, just like a computer.

Apple will rule this area for the next decade, no question about it.

They have more money in the bank for R & D investment then RIM, Microsoft, Amazon, and Google combined!

2008 Oct 29 02:57 PM

[winindthedust:]

A quote from Andy Zacky to put things in real perspective:

"Right away, one ought to notice the staggering growth rate in both revenue and earnings that Apple displayed in 2008. Apple's real revenue grew 54.5% from $24.637 billion in FYE 2007 to $38.041 billion in FYE 2008 – a full $13.4 billion growth in revenues. Even more impressive is Apple's 81.2% growth rate in adjusted net income. For a company that is trading at 12 times 2008 earnings, it doesn't take a genius to conclude that Apple is severely undervalued. Especially since Apple currently trades at about 3.37 times its cash position – which is objectively and significantly lower than every other large cap tech company.

Google (GOOG) trades at 7.18 times its cash position, Research in Motion (RIMM) at 15.51 times cash, Amazon (AMZN) at 9.15 times cash, Microsoft (MSFT) at 9.13 times cash, Cisco (CSCO) at 3.62 times cash, IBM at 10.96 times cash, Intel (INTC) at 6.54 times cash, and Hewlett-Packard (HPQ) at 5.15 times cash. What is more, only GOOG, AAPL and MSFT have no debt of the companies mentioned above. Apple has the largest net cash position than any of those companies and Apple has more net cash than RIMM, GOOG, AMZN and IBM combined.

I will take up the issue of valuation later on this week where I'll give a comprehensive analysis of several large cap tech companies. Preliminary research indicates that Apple is extensively more undervalued than every other large cap tech company at current levels and this is due almost exclusively to the subscription method of accounting. In order for Apple to be trading at the same current valuation as GOOG, RIMM, AMZN, MSFT, CSCO and IBM, Apple would have to be trading at $206.25 – and that's after this current correction in the market place.

The fact of the matter is, Wall Street never valued Apple properly prior to the beginning of this bear market. Apple should have been trading at $300 before this recent downturn and even after this excessive sell-off, Apple should be trading at $158.92 at current S&P levels. I leave it to my readers to make their inferences about where Apple might be headed in 2009 and 2010."

2008 Oct 29 03:02 PM

[provengers666:]

I love analysis where the writer suggests he knows better than the market where a particular stock "should" be trading at. These same arguments could have been made months ago and yet the stocks are all down.

Another point that seems to be continually glossed over is that most people doubted Apple's ability to take market share in the handset market, but yet they did so. Similiarly, the pundits are completely writing off RIMM's ability to take market share in the consumer market--where up until now they have not had much of a presence. Does anyone here really believe that the 100+ million subscribers that makeup Vodafone and Verizon Wireless and the business enterprise users whose employers don't allow iPhone on their exchanges would not look forward to a smartphone that offers the same, if not better features, than the iPhone?

VALUATION: If you look at current expectations, RIMM is projected to only get a 1mn handset bump from their new phones in the next quarter. By all accounts, the STORM and, to a slightly lesser extent, BOLD will be sold out on DAY ONE. Even so, RIMM's EPS for next year is still expected to come in at $4.74 giving them a growth rate of 32% versus AAPL's 24%. YET, RIMM is trading at a fwd-PE of 10 versus AAPL's 15.7. There is simply no rational reason for this other than the fact that the market is completely dismissing RIMM's ability to gain marketshare in the consumer market.

I think that at current valuations RIMM is the better investment.

2008 Oct 29 07:55 PM

[Timeline St...:]

@anon123666: I respectfully disagree. RIMM will be in 3 years what Palm is today - a failing company owned by some sovereign wealth fund or taken private by an equity fund that thinks it knows how to polish a turd.

I can see the evidence surrounding me for why RIMM has been successful in the past. All I need to do is walk around an airport or a financial district street to see Blackberry users. The question remains, why will they be relevant in the future? And not just treading water, but increasing market share? The answer is that they simply cannot. Their products, while wonderful for reading enterprise e-mail, are simply not interesting enough when stacked up against the competition. Yes, the market is discounting their ability to grab share. And yes, that would be correct.

Put it this way, do you think RIMM envisioned 15 months ago that Apple would outsell them in handsets? What they hell do they do now? Apple hasn't even focused one iota on enterprise, and look where they are.

2008 Oct 29 08:56 PM

[provengers666:]

Timbo: It is clear to any objective reader that your analysis is based on nothing analytical. In fact, your entire post could be boiled down to "apple is better and will continue to take share simply because I they are more 'interesting' and have sold more handsets in 1 quarter."

The truth is that the number of handsets sold in that particular quarter is too narrow a view to glean anything about RIMMs Q4 because in Q3 the iPhone 3G was launched, while RIMM has yet to launch their most covetted handsets: namely the BOLD & STORM. It is like saying that the Sega Dreamcast video game system should have won the console war for that particular generation since it sold more units PRIOR to Sony releasing their original Playsation 2, which went on to kill the Dreamcast. It may not be the best analogy, but you cannot extrapolate a victory BEFORE the fight has even begun!

I bet that if you look back at RIMMs upcoming FY Q4 you will find that RIMM significantly outsold AAPL in the # of handsets.

Watch and learn....

2008 Oct 30 03:58 AM

[Hayweed:]

Problem for Rimm is that their quarter ends on November 30th and none of the new phones are for sale. The quarter looks to be dismal which may further depress the stock.

The real question for IT people is do you stick with Rimm which has slowing sales, too many different phones, and only 1.6 billion in cash or do you switch to Apple which is quickly displacing the cell phone handset makers. Point being Motorola which is quickly downsizing claiming weak sales, too many phones, too many platforms.

2008 Oct 30 12:57 PM

[provengers666:]

If you know anything about how corporate IT decisions are made, you would realize that RIMM has a lock on this market and it is BY FAR more difficult to penetrate than the Consumer market, where the barrier to entry is pretty much non-existent. Why? Because the #1 corollary for corporate IT managers is "Cover Your A$$". That means if it ain't broke, don't fix it. And you would be hard-pressed to find any IT Manager who would change from Blackberry to Apple. This is a KEY point and it is clear that many on this board simply don't understand.

Bottomline: Rimm already has the enterprise market where Apple-despite its best efforts--has made little progress. It is Apple who should be worried about RIMM targeting their Consumers, who are NOT protected by any barrier to entry.

2008 Oct 30 01:28 PM

[Hayweed:]

Still doesn't answer the question of why they can't get any new phones to market which is why Rimm is broken. They may hang on as a niche player but they lost the consumer market when they promised cool new phones but never delivered. I am not saying it is gonna happen soon, but Rimm is in a world of hurt right now. Palm used to own the PDA market and look at them now

2008 Oct 30 03:19 PM

[provengers666:]

According to your logic, any stock that has a delay in shipping a product is a loser. You may want to refresh you memory, because the original iPhone was delays a few times. As we speak, RIMM is shipping the BOLD to AT&T and it has already been getting rave reviews as the best Blackberry to date. Add to this the fact that AT&T is going to be providing free wi-fi for customers who buy this phone (just like the iPhone) and it isn't hard to see that RIMM is only NOW starting to compete. Looking back at Q3 and extrapolating AAPLs sales versus RIMM is completely--well, backward. Going forward, you have the STORM and according to every in-depth review so far it is an iPhone Killer.

So you have all of the above catalysts AND a company that is growing Earnings FASTER than Apple, with a PE that is at least below that of Apple by 50%. I'll let you figure out the rest....

2008 Oct 30 08:39 PM

[well:]

sticking up for rim is going againast the crowed as alot of folks made bets against it, but looking at facts. rim is targetting both business and cosnumers. they generate profits on phones ,support and subscriptions, they have their own secure data center and save businesses from IT dept support costs, like iphone the device is sold worldwide so its sales is not limited to the US. in addition for those who dont like the touch screen rim offers keyboard and storm which i heard good things about offers touch screen. battery is removable, it's secure, you can travel and use it just about anywhere, apps, developer friendly support exchange etc... and franky companies that do well dont sell themselves so a sellout is nothing but speculation. in short i see potential in both appl and rimm

2008 Oct 31 12:36 AM

[.crazylegs..:]

TimboM - why doesn't anyone take into account no iphone sales for two months before the 3G launch? or the surge you typically get from a new product launch when discussing units sold. realistically, iphone sales last quarter represent 5 months of demand or a little over 4.1 mln units for an adjusted 3 month period? still fantastic but not more than RIM.

and to talk about how one or the other will dominate is just so blindly stupid when you put it in the context of a billion unit a year market where current smartphone penetration is maybe 15%. check your apple love at the door before anyone will actually take heed to your comments.

anon12366 - settle down as well. the storm is no iphone killer, but it does give those who want a superior email experience the option of a touchscreen. (anyone who really thinks iphone's email client is better needs to get their head examined - i just loved going in and out of my various mailboxes to check messages, so tedious, and that's just the beginning!) and as far as investment merit, they both have huge potential, but apple actually trades at about 8X historical money in the bank free cash flow, after netting out their ridiculous amount of cash on the balance sheet. it is much cheaper and has a diversified product base between iphone, ipod, mac.

best way to play the merging smartphone growth: own both like myself and recognize both companies have their strengths. and i guess no one listened to silly balsillie when a few months ago he said he sees CORPORATE smartphone penetration at only about 10% right now. so there is room to grow there and the consumer side for RIM and there is plenty of room for iphone to grow in both categories as well.

2008 Oct 31 01:14 PM

[.crazylegs..:]

hayweed, palm's failure isn't due to anything other than NOT rewriting their OS to support a phone and not just a PDA instead of trying to bolt on phone functionality to a PDA OS. this is why their devices are so unstable. the funny thing is you still lots of alms out there, which frankly amazes me that folks will put up with that sh*t. at least my blackberry and iphone are very stable.

2008 Oct 31 01:16 PM

[.crazylegs..:]

it's amazing to me how staunchly folks defend their Apple or their RIM as I continue to read these comments. apple lovers think it will be a binary result with appl=1 and rim=0. that's the funny thing, this will not be a binary result. both can grow massively.

i guess no one talks about distribution either. appe will get to about 70 networks? today RIM sells through 400 networks. big difference. rim's strategy is ubiquity. apple's strategy is we've created something we love and is amazing and if you like it buy it, if not, f*ck off. cut and paste? mms? weird they take such stances. ok, enough.

2008 Oct 31 01:23 PM

[Timeline St...:]

@anon123666 - I have Apple love because I have used both a Blackberry and an iPhone. My Apple love is based on the respect that I have for the company and its continued innovation. RIMM has been innovative too, it's just that time and trends are passing them by. We are arguing about something that the market will decide. Just plot the growth rates, that's all I'm saying.

Two more facts about RIMM:

Storm being given away for free with 2-year contract by Vodaphone:
www.blackberrynews.com.../

That article's right about how Vodaphone rejected the first version of the Storm.

Second, App Store not open until March 2009! www.electricpig.co.uk/.../

And despite what some of you have said, the outcome of this competition will be nearly binary. It's almost like a standards war.

2008 Nov 01 07:13 AM

[Timeline St...:]

One more thing....Apple will sell 13-14 milion iPhones in the 2008 calendar year, 18 months after introduction of its first. They receive about $400 revenue for each. That means that they have built a $5-6 billion smartphone business from the ground in less than 2 years.

RIMM has been in the smartphone business for 5+ years and has sold more than 100 million phones Their fiscal year-ending 1-Mar-08 revenue? $6 billion.

(For the purposes of revenue comparison I'm treating the Apple revenue in a a non-GAAP fashion to compare equally with RIMM).

Free cash flow for RIMM $1.2 billion for year ending 1-Mar-2008.

Free cash flow for smartphone portion of Apple? If you take the $3.8 billion in Apple cashflow for Q4'08, you may derive an operating cashflow associated with the iPhone of $2.5 billion. If you assume conservatively that CapEx for smartphone division was $500 million, then the free cash flow is $2 billion, after 18 months of this division's existence.

Furthermore, RIMM is getting nowhere near $400 for each phone (subsidized or unsubsidized) from carriers, and their past model of selling unsubsidized phones will most definitely not stand up to fierce and growing smartphone competition.

Just think about where Apple will be in 2 years if these growth rates continue. They can still add features to a new model phone - a keyboard for those who want it, etc. Because their market penetration is so low already, look at the remaining potential.

If I were an executive at RIMM these numbers would keep me awake at night, especially with a stock price chopped by 65%, which is just enough to make Microsoft come sniffing around.

Is there room for both Apple and RIMM? Of course. Will RIMM look pretty in 2 years? I don't think so. Think Palm, SonyEricsson, Motorola, Borland, Sun Microsystems, etc.. I know that RIMM looks really great over the past few years, and that during that time it was the market maker. But if you squint you can see the future, and it ain't pretty.

2008 Nov 01 08:34 AM

[Timeline St...:]

@anon123666 - Oh yeah, good one to reference how corporate IT decisions are made. I bet Sun Microsystems thought they had that pretty good back in 1999. How are they doing now?

How much budgetary pressure you think those IT managers are getting now? How would you like to be one at AmEx, Lehman, Motorola, or God forbid the former Bear Stearns now? You think that's pretty? And you think that's a big upside over Apple? The business (and especially financial) professional's obsession with their Blackberry cuts both ways. They've seen the heights, now let's see what happens in the depths.

To paraphrase Wayne Gretzy: "I don't skate to where the puck is, I skate to where it's going to be."

2008 Nov 01 08:46 AM

[Timeline St...:]

Oops - GretZky.

2008 Nov 01 08:55 AM

[Timeline St...:]

One more operating comparison from their last fiscal year reporting.

RIMM turns its inventory about 7.5 times per year.

Apple turns its inventory about 40 times per year.

Which of them are in danger of losing profit due to unsold inventory writeoffs?

2008 Nov 01 12:20 PM

[turleymuller:]

Timbo- $400 for each iPhone ? where are you getting that number? It's more like $640-$650 per iPhone


On Nov 01 08:34 AM TimboM wrote:

> One more thing....Apple will sell 13-14 milion iPhones in the 2008
> calendar year, 18 months after introduction of its first. They receive
> about $400 revenue for each. That means that they have built a $5-6
> billion smartphone business from the ground in less than 2 years.
>
>
> RIMM has been in the smartphone business for 5+ years and has sold
> more than 100 million phones Their fiscal year-ending 1-Mar-08 revenue?
> $6 billion.
>
> (For the purposes of revenue comparison I'm treating the Apple revenue
> in a a non-GAAP fashion to compare equally with RIMM).
>
> Free cash flow for RIMM $1.2 billion for year ending 1-Mar-2008.
>
>
> Free cash flow for smartphone portion of Apple? If you take the $3.8
> billion in Apple cashflow for Q4'08, you may derive an operating
> cashflow associated with the iPhone of $2.5 billion. If you assume
> conservatively that CapEx for smartphone division was $500 million,
> then the free cash flow is $2 billion, after 18 months of this division's
> existence.
>
> Furthermore, RIMM is getting nowhere near $400 for each phone (subsidized
> or unsubsidized) from carriers, and their past model of selling unsubsidized
> phones will most definitely not stand up to fierce and growing smartphone
> competition.
>
> Just think about where Apple will be in 2 years if these growth rates
> continue. They can still add features to a new model phone - a keyboard
> for those who want it, etc. Because their market penetration is so
> low already, look at the remaining potential.
>
> If I were an executive at RIMM these numbers would keep me awake
> at night, especially with a stock price chopped by 65%, which is
> just enough to make Microsoft come sniffing around.
>
> Is there room for both Apple and RIMM? Of course. Will RIMM look
> pretty in 2 years? I don't think so. Think Palm, SonyEricsson, Motorola,
> Borland, Sun Microsystems, etc.. I know that RIMM looks really great
> over the past few years, and that during that time it was the market
> maker. But if you squint you can see the future, and it ain't pretty.

2008 Nov 01 03:22 PM

[Timeline St...:]

OK, T Muller, you made my point even better for me. I extrapolated from cash flow numbers because I know that Apple recognizes cash immediately while it recognizes revenue over 8 quarters. I would highly encourage anyone investing in either of these companies - or any company - to deeply examine and understand what makes their financials.

Thanks for the info, that makes my AAPL long position even better.

Here's another little nugget about the Blackberry Storm that makes it less likely to succeed - it has no WiFi. If you have an iPhone or a Blackberry that has WiFi, you realize that you use it all the time.

wifinetnews.com/archiv...

2008 Nov 01 04:02 PM

[well:]

timbom, it's clear you love your iphone as do i, but your essay if a little bit off base. you've made a few points but for the most parts you've missed alot of facts . your acting like aapl invented something brand new when truth is , my pocket pc with 5 years ago did what iphone does now.

rim dosnt just put produce hardware like MOT or NOK, they generate profits off support, subscriptions, and new phones they put out. they have their own data center, and busineses go for blackberries because its a solid secure product, now their aiming for the consumer market which will generate more revenue worldwide not just in the US. the iphone as nice as it is, is a pain for folks that dont like touch screen, the mail is a pain sometimes, security is questionable, no gps, battery issue,
my point is its nice but not perfect.

either i had a chance to review the storm, and the move in the UK was very good one. it looks very promising i was impressed, I would definately get one if that kinda offer was made here. In addition to that theres the bold, and the flip phone as well doing good so far. rim will have a good month im sure of it as well as aapl, im seeing great potential in both

2008 Nov 01 08:01 PM

[Hayweed:]

Still Rimm is spreading itself way too thin. They have 3 new phones

Flip - 2g phone
Bold - 3g phone
Storm - evdo 3g with touchscreen
Javelin - 2g curve replacement

They sell to 400 different carriers which means multiple versions of each phone. Apple has one phone, one version, one software version.

Rimm has numerous operating systems.

Rimm is trying to start an app store that should begin in March of 2009. Are developers going to write software for all 4 phones. How will that work. What if sales do not ramp this Christmas while Apple has already sold 200 million downloads as of 2 weeks ago.

The pricing is problematic. The bold is $299. Isn't that a bit high in comparison to the iphone. In Canada, Rogers just cut the price so how long will the 299 hold up here. The Flip is around $150 depending on rebate which is too much for a 2g phone.

Rimm is spending big money on marketing showing ads that don't show the phone doing anything. Even when they show the phone the phone image is computer generated such as people's faces. They are trying to promote life on blackberry but never show it working. The storm has been advertised but never shows the screen. Why?? Apple is advertising all the time, showing the phone doing the app store, directions, gaming, etc. They are advertising the touch like crazy which is the iphone without the phone. The funnest ipod ever is a pretty cool example of what the phone can do. They run the mac vs.pc ads so Apple is everywhere and seems to be mocking everyone else that their products are the best.

As an investment, Apple is in computers, software, mp3 players, phones, wifi gadgets, Servers, routers, music, movies, tv, and they have retail stores where they sell their stuff and other people's add on products.

Rimm is in phones and software, and they make a server.

Pretty easy investment decision, Apple is way more diversified.

2008 Nov 02 08:54 PM

[well:]

actually its nice that rim has many phone designs to chose from, from touch screen to keyboard with flip fone, it offers something to fit everyone

anyways - storm coming out this month, if they can get the pricing just right, it's definately a hit.. i would definately pick one up as a present

2008 Nov 02 09:24 PM

[Network Effect:]

Does anyone find it interesting that RIM launched the Bold in the US on election day? Seems like an excuse for why people aren't lining up for the Bold to me.

2008 Nov 03 03:56 PM