Can Blackberry Maintain Its Rise in Popularity Among Teens?

Research In Motion's (RIMM) most recent earnings report triggered an interesting reaction from analysts and the investment community in general, as the bulk of post-earnings discussion seemed to focus not on the numbers themselves, but on the fact that 80% of the quarter's new Blackberry subscriber growth came from the consumer. For the sake of perspective, RIMM added roughly 3.8M net new Blackberry subscribers in Q1, and ~3.04M of these new subscribers were consumers, as opposed to businesses. While there is some degree of obviousness to the fact that businesses are providing fewer cell phones to employees, our informal research into the consumer aspect of Blackberry growth indicates that RIMM is currently reaping the benefits of having happened to produce a "cool" product. While analysts have properly classified the recent consumer based growth as more fickle in nature than business based growth, we think that due to the nature of the newest wave of Blackberry subscribers, the growth may be more tenuous than most perceive.

It is fairly well documented that the Blackberry is the smart phone market's most dominant player: The most recent survey by ChangeWave credits Blackberry with 41% of the consumer market for smart phones. Additionally, the survey found that 11.2% of consumers plan to purchase a smart phone in the next 90 days, up from a figure of 6.8% when the survey began in June of 2005. So, we've established RIMM as the market share leader in a consumer market that has been steadily growing since 2005. With these facts established, there is a tendency to characterize the strong recent Blackberry consumer growth as the simple continuation of a trend that appears to have some degree of staying power. However, our anecdotal and unscientific investigation into the unscientific yet powerful concept of "cool" has led us to the conclusion that Blackberry's are in the midst of a sharp popularity increase amongst the teenage population - a segment of the population that does not adhere to brand loyalty.

Interestingly, the most common smart phone purchase denominator, at least amongst the teenage consumers we spoke with, is the ability to check social networking sites like Twitter, and particularly Facebook. The situation in Iran has called attention to the political and organizational powers of these sites. We would assert however, that Facebook and Twitter have also become an increasingly significant factor in teenagers' purchasing decisions, most specifically with regard to cell/smart phones. The email and browsing capabilities of smart phones provide teenagers with the perfect medium by which to communicate with friends, real time. As they are often obligated to participate in the same cell service provider as their parents, it isn't surprising that more teenagers would purchase the Blackberry, with its wider network availability, than the exclusively AT&T (T) iPhone.

The two risks to future Blackberry growth, considered within the framework of the existing reality, are that Apple (AAPL) manages to strike deals with additional wireless providers (think Verizon (VZ)) or that a widely available "upstart" device (think Palm's latest) manages to gain traction with teenage consumers. With the teenage predisposition towards fads/trends, we would argue that a shift away from the Blackberry has the potential to occur quickly, in erratic fashion, and for intangible reasons (such as "cool"). In our opinion, this is not an ideal situation for a company like RIMM, whose shares trade on assumptions of healthy growth going forward.

Disclosure: No position in any of the companies mentioned.

Comments

[mollytjm:]

in your own words, this wasn't much of a 'study'. teens are locked into their parents' carrier and smartphone purchases by every group are on the rise, so this 'result' is predictable.
did you go to an Apple store this weekend? Friday AND Saturday the store at the King of Prussia Mall had lines to get into the store to buy the iPhone. The store was packed. They're probably there today too.
your 'study' didn't take into account all those teens who had to stay on their parents' carrier who then also bought an iTouch because they really want an iPhone, since most of them have had a iPod for a couple years and won't be parted from it.
Blackberry will stay one of the big players, but it's growth is not much compared to the inroads Apple has made into a market it's barely entered.
Palm will lose to Blackberry, for the most part. Apple will most likely be on other carriers in 2010. This is a very hot market that is just starting its growth. Smartphones will be considered 'essential' to the world at large within the next 18 months to 2 years.

Jun 21 08:12 AM

[aja8888:]

The two biggest drawbacks to the iPhone are the small touch sensitive keyboard and the limited e-mail capabilities. While Apple can overcome the e-mail deficiency, the almost useless keyboard will continue to haunt it. Several of us tried iPhones for work use and before long, they were handed off to our children, traded in for a Blackberry, or sold on eBay. I'm keeping my Curve, even though it is 2.5 years old.

Jun 21 11:00 AM

[droopydro:]

ha


On Jun 21 08:12 AM mollytjm wrote:

> in your own words, this wasn't much of a 'study'. teens are locked
> into their parents' carrier and smartphone purchases by every group
> are on the rise, so this 'result' is predictable.
> did you go to an Apple store this weekend? Friday AND Saturday the
> store at the King of Prussia Mall had lines to get into the store
> to buy the iPhone. The store was packed. They're probably there
> today too.
> your 'study' didn't take into account all those teens who had to
> stay on their parents' carrier who then also bought an iTouch because
> they really want an iPhone, since most of them have had a iPod for
> a couple years and won't be parted from it.
> Blackberry will stay one of the big players, but it's growth is not
> much compared to the inroads Apple has made into a market it's barely
> entered.
> Palm will lose to Blackberry, for the most part. Apple will most
> likely be on other carriers in 2010. This is a very hot market that
> is just starting its growth. Smartphones will be considered 'essential'
> to the world at large within the next 18 months to 2 years.

Jun 21 11:32 AM

[winindthedust:]

"Stickiness" otherwise known as "brand loyalty" is the name of the game.

Reminds me of Apple's 1984 commercial, which has the same application today for the mobile computing market, as it did back then. The only difference, is that Apple is wiser and less naive to the potential backstabbing of partner companies.

With phones, people bought what was fed to them (status quo). IPhone changed this. Expectations are high, failures and success will be huge & catastrophic.

Jun 21 12:19 PM

[Frank Castle:]

While Apple has barely entered the market you have to realize Apple has more to lose the RIM as Apple values having a higher margin per device - so does Apple want market share or margin? In the past Apple always goes for profit first and you see this now. They would be happy having a smaller market share as long as it's on their terms and drives the most profit.

RIM has the benefit of multi carrier agreements and have a number of devices that are little to no cost (Pearl, Pearl Flip, Curve) that continue to grow with demand. I travel often and see more people, teens included on Blackberry then anything else. Is this brand loyalty? No - 90% of people only care about a device that works for their needs, fits their budget AND is something their friends use.

I walked through 2 malls this past weekend and the only people at Apple stores are ALREADY iPhone users. I doubt apple / at&t is attracting many new subs due to still being locked to one carrier and still having high monthly costs to having an device.

While iTouch is part of the iPhone - it shouldn't be counted in its market share and lumped into iPod sales as we are focused on cell phone side of this where RIM, Palm etc reside.

Jun 21 12:25 PM

[winindthedust:]

Sorry, couldn't disagree more. If you are talking about business, then you must wast your employers time, as 'long' email is a waste of time on anything but a full keyboard on your laptop or desktop. Mobile texting & email is certainly not 'useless' on the iphone, and actually quite good. For the world wide market, it's adaptability is priceless. I agree, the curve is excellent for it's 'mobile' keyboard... but not something I'll use for more then 15 words if I have the choice.

Where mobile makes money for business, is in adding labor efficiency and adding the ability to perform functions that can be performed in the field, that formally could only be performed in the office. This means true mobile computing with sky's the limit applications tailored to individual business needs.

In the future, I do not see typing as the 'choice' for mobile communication. Rather, speaking is. You want to give a quick response? Then sure, text it. You want to give a detailed explanation, with a picture and attachments to multiple parties... sure, it's email. In the future, however, written emails will not be composed by typing, but by speaking. This is fast, efficient, and accurate. Proofread, and send.

if you do ALL of your email on a mobile device & spend 8 hours a day doing it, then get a Curve or a Bold. If you want mobile computing, get an iPhone.


On Jun 21 11:00 AM aja8888 wrote:

> The two biggest drawbacks to the iPhone are the small touch sensitive
> keyboard and the limited e-mail capabilities. While Apple can overcome
> the e-mail deficiency, the almost useless keyboard will continue
> to haunt it. Several of us tried iPhones for work use and before
> long, they were handed off to our children, traded in for a Blackberry,
> or sold on eBay. I'm keeping my Curve, even though it is 2.5 years
> old.

Jun 21 12:30 PM

[aja8888:]

Heck, if you are going to use "speaking" as the choice for communication rater than typing out an e-mail, why go through the bother of dictating and fixing the mistakes? Just CALL the sender! Maybe we will actually be using these devices as phones again!


On Jun 21 12:30 PM winindthedust wrote:

> Sorry, couldn't disagree more. If you are talking about business,
> then you must wast your employers time, as 'long' email is a waste
> of time on anything but a full keyboard on your laptop or desktop.
> Mobile texting & email is certainly not 'useless' on the iphone,
> and actually quite good. For the world wide market, it's adaptability
> is priceless. I agree, the curve is excellent for it's 'mobile' keyboard...
> but not something I'll use for more then 15 words if I have the choice.
>
>
> Where mobile makes money for business, is in adding labor efficiency
> and adding the ability to perform functions that can be performed
> in the field, that formally could only be performed in the office.
> This means true mobile computing with sky's the limit applications
> tailored to individual business needs.
>
> In the future, I do not see typing as the 'choice' for mobile communication.
> Rather, speaking is. You want to give a quick response? Then sure,
> text it. You want to give a detailed explanation, with a picture
> and attachments to multiple parties... sure, it's email. In the future,
> however, written emails will not be composed by typing, but by speaking.
> This is fast, efficient, and accurate. Proofread, and send.
>
> if you do ALL of your email on a mobile device & spend 8 hours
> a day doing it, then get a Curve or a Bold. If you want mobile computing,
> get an iPhone.

Jun 21 01:34 PM

[JamesApple:]

Rim force BOGOberries down peoples' throats through BOGO giveaways. Rim is a cheap whore. Now that Blackberry can't be given away for BOGO deals on blackberries alone, Rim drags in the Samsung in a Buy1 blackberry Get1 blackberry plus 1 Samsung Free deal. Rim's only purpose is to flood the world with junky blackDeathBerries. Rim is cheap whore. Rim tricks the unwary people into thinking Rim is not a cheap whore by throwing away millions of junky Rim phones for free while at the same time throwing billions of dollars into massive advertisements. Rim is cash poor now.

Short Rim in the low 20s in August.

Jun 21 02:27 PM

[Roger Knights:]

The latest iPhone OS API's include the ability to interface wirelessly with external hardware, making it likely that a physical keyboard will be offered as an accessory by an aftermarket provider. That will fix a major flaw for heavy texters.

Jun 21 02:51 PM

[JamesApple:]

People are 2 lazy. They thought the iPhone is as simple and useless as the BOGOberry.

Let these guys be using that stupid QWERTY keybord until the year 9999, when people would be using telepathic keyboards and these archaic cavemen would still be sending emails using their BOGOberries.

Rim and their users are joblessly stupid.

Jun 21 03:39 PM

[aja8888:]

I guarantee that in the year 9999 only the cockroaches will be reading this drivel.......Actually, the products out and planned for introduction by Nokia (the largest phone maker in the world) are very nice. The smartphone market is still pretty small worldwide and open for new suppliers. My bet is that the Asians will find a way to copy the best f the "three" majors and flood the markets with $59.00 copies that work very well (just like they have many other products).




On Jun 21 03:39 PM JamesApple wrote:

> People are 2 lazy. They thought the iPhone is as simple and useless
> as the BOGOberry.
>
> Let these guys be using that stupid QWERTY keybord until the year
> 9999, when people would be using telepathic keyboards and these archaic
> cavemen would still be sending emails using their BOGOberries.<br/>
>
> Rim and their users are joblessly stupid.

Jun 21 08:31 PM

[xtopherm:]

Not trying to pile on, or anything, but I was in an awfully long line for the iPhone 3GS as well this weekend (Boston area) and there were a few people in that line who were turning in perfectly good Blackberry Bolds.... The B'Berry storm is pretty widely acknowledged as a disaster. I think the BB is a good product - I was an avid power user before switching to the iPhone and it is not that the BB is bad, it is just that iPhone shows how much more a portable device can be. BB still cannot be beaten on secure email, calendar and contacts, but carrying an iPhone gives you all that and so much more the BB starts to feel like a buggy whip in comparison. BB is far from releasing anything remotely "cool" as you put it and that ought to be a major priority for them if they want to survive and thrive.

Jun 22 12:12 AM

[JamesApple:]

Copying Apple is like trying to copy Light.

Jun 22 10:18 AM

[Carneades:]

Just to clarify a bit, this piece was not meant to be an attack on the iPhone. The observation was that smartphones in general have gained popularity, especially with teens. It is true however that iPhone has maintained a fairly consistent 30% share of this market, while the Blackberry has managed to increase it's percentage share. A typical Apple Store is very crowded right now, however 1) the Apple Store is always crowded, and 2) there are far fewer Apple Stores in a given metropolitan area than there are Verizon,Alltel,Sprint etc. outlets, resulting in a higher concentration of iPhone buyers at a given place and point in time.
Finally, I don't think RIM's future success depends on developing a product that will compete with the iPhone in the "cool" category. Just look at what happened to Motorola with the Razr.

Jun 22 05:15 PM