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 below. 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.
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
The iPhone (AAPL) 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%.
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's and analyst's mind?
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?
Disclosure: Short RIM