Research in Motion: Unlike Apple, No Slowdown in Subscriber Growth

Research in Motion (RIMM) released updated subscriber growth and unlike Apple (AAPL), they are not seeing a slowdown.

RIMM now expects net subscriber account additions for Q4 to be approximately 15-20% higher than the 1.82 million net subscriber account additions forecasted by RIMM on December 20, 2007. The total BlackBerry subscriber account base is expected to be approximately 14 million at the end of the quarter.

Jim Balsillie, Co-CEO at RIMM said:

BlackBerry smartphones proved to be a big hit throughout the holiday selling season and we’re pleased to see RIMM’s business momentum continuing in the new year.

The seasonal slowdown in net subscriber account additions that we expected in the new year did not occur and our focused execution with partners has continued to produce strong results within both enterprise and consumer segments.

While Apple's recent cutback in orders was seen as a "seasonal" cutback by Apple supporters, and not a sign of slowing sales, what can we now make of RIMM's results? Well, we now know people are still clamoring to buying smarts phone, just not iPhones. A 20% increase over estimates is massive.

The reason? I can get a Blackberry Pearl for $99 from almost all wireless carriers. Before the iPhone was even released I said "lower the price to $299 and you may have something, a $599 phone will not gain mass acceptance no matter what it does."

Now rumors are out indicating that just might be happening. It would be the second price drop on the phone in less than a year (8 months).

Jobs missed the market on this one. The iPod was unlike any other device at the time it was introduced and thus the reason for its price inelasticity. Apple was able to charge "less for less" (lower prices were only on lower memory products) rather than giving customers more for a lower price in order to keep pace with competition. Now that cell phones are beginning to become customers' music players, we are noticing price drops in iPods.

The iPhone is unique, but its features appear in many other devices at a fraction of the price. One can argue all day about the intricacies of those features and whose are better, but for the vast majority of people, those intricacies are irrelevant while price is not. In a slowing economy, people will choose price for a commodity like device. Based on the results, even the most ardent Apple supporters must admit this. The only other option is that consumers feel the Blackberry is a superior product and thus the reason for diverging sales trends.

Just watching local TV one would witness a huge push by Verizon (VZ) and Sprint (S) in their Blackberry promotions. Even AT&T (T) is sending me mailers pushing the Blackberry. The most common price is the $99 for a Pearl. An Apple price drop to $299 is confirmation of the above. The thing is, RIMM is packing more and more into its $99 and $199 models. $299 may not be enough for Apple, they may have to go lower...

Disclosure: Sold Apple $280 calls in Jan.

Comments

[JIM]

You are making some shamelessly wildass assumptions here about iPhone demand. I don't see much data aside in your idle speculation here.

Anyone can roll a joint and spout lazy pseudo analysis.

Apple, until I see otherwise, from a credible source, is on track with iPhone, iPod, and Mac sales.

Don't delude yourself with your obvious pipedream.

[Dan Poarch]

Todd never has data to support his speculation.

Maybe the Blackberry is the new RAZR? Look at Google statistics for web traffic and you see the iPhone blowing out any other device. So maybe everyone is getting Blackberries because they can afford them, not because they really want a full-featured web browser. There is a market for both.

Besides, no one has proven that Apple's cutbacks aren't correct. What if 6 months from now Blackberry is sitting on millions of items in inventory and Apple is on target?

[wall streetguy]

This is an absurd post. He uses rumors of an iphone production cutback and rumors of an iphone price cut to confirm his original belief that the iphone was priced too high to succeed in the market. This is the major thrust of the story.

There is simply no logic here. Current massive price reductions by one company (RIMM pearl at $90) are a sign of strength while future price reductions at another company (APPL iphone rumor) are a sign of weakness. And there is no mention that RIMM is not raising its revenue numbers. The real story is that both RIMM and AAPL are benefiting from exploding demand in advanced phones. The iphone is in such high demand that there is a hot black market for the device with people hacking them to run in markets not yet supported. Mentioning how the competition will catch up to the iphone while not mentioning how the market will catch up to a blacberry shows further bias. This blogger is a hack and should be ignored.

[todd su]

Dan,

i fail to see what web stats have anything to do with sales? that is a commentary on the user.

RIMM is saying "sales" are ahead of expectations, not "expected demand"...

Apple just cutback orders in anticipation of a slowdown. so they may be sitting on loads of components already. This must be real because of the lag time to turn around production. They just cannot say "oops, we need more" and get the stuff tomorrow.

they have to be sure demand will slow.

[Brewer]

Apple is only reducing inventory because of two things. One, they always buy in massive quantity in order to get the best component prices. They bought an incredible quantity to be sure they could meet holiday demand.

Secondly, Apple is most likely coming out with a new model that will make the blackberry look even more obsolete (if that were possible).

[T Muller]

Could be cutting back orders because Apple is planning to release a 2nd generation iPhone and new device will cannibalize the old one?

Certainly, it's well know that Apple is likely to release a new iPhone in the not too distant future, meaning that sales could slow because nobody wants to buy and new device comes out right afterwards. Many people tell me they are waiting for one with 3G. Could be rumors about a price cut is because a new device is coming out and Apple has to shore up the price points.


There's no confirmation of cutbacks, just hearsay coming from component suppliers. They are numerous suppliers and many inputs, and likely for some parts Apple users several manufactures. - and most inputs are commodities and can be used in many devices, not just specific to an iPhone.

Hence, input makers on the other side don't have a full perspective of Apple's supply chain and distribution. And knowing Apple, you know they try to keep everyone out of the loop. It's probably speculation.

It's very possible that cutbacks are that high, but can't take it as confirmed fact.

It's possible that the cutbacks are not iPhones, iPod Touches, bc they share the same components excepts for the wireless radio. There are only two suppliers for it.

Apple could have switched suppliers thus ending orders with current ones.

Possible that Apple s squeezing suppliers. Cutting back on suppliers when they have a glut, adding pressure to slash prices. Apple could then procure later at a much lower price. Likely not, but can't rule it out.

Apple is very secretive and calculated. Analyst don't are clueless to Apple's doings, they always way off on their earnings estimates.

We'll know for sure eventually, but now one can only speculate,

[RichardAlvarado]

10 million in 2008 plus the 4 million in 2007. That puts Apple inline with RIMM with 14 million. How is Rimm better when they can't out sell Apple?

[Pah-leeze]

Sulli,

First. How are you comparing subscriber growth? Supply orders for various Apple components is not device-in-hand-bought-... subscriber growth. You're not even comparing the same thing!

Second. RIMM subscribers up, but no revenue increase. That is getting ignored and is a VERY bad sign. What's the explanation for their margins not holding? RIMM revenue is not increasing as much as it should for increased subscriber takedown.

Maybe Apple has issues, maybe not. But this kind of unscientific garbage journalism is one of the reasons why I grow less and less interested in wasting time on Seeking Alpha.

[Pah-leeze]

BTW, in case you somehow missed the issue with RIMM I'm referring to, see here. It talks about the fact that RIMM raised subscriber add guidance, as you trumpet here, but did NOT raise revenue guidance.

finance.yahoo.com/tech...

[thompr]

<An Apple price drop to $299 is confirmation of the above.>

You use RUMORS to CONFIRM speculation?!?

Classic.

You need to go back to J-school... assuming you ever went there to begin with.

Thompson

[pats]

Todd
When did Apple say they were experiencing a slowdown in Iphone sales?
The only data discussed at the CC was 3.704 Mil at end of year and 4 Mil by SJ at Mac World. How does this equate to this big slowdown. What data shows Apple has cutback production of the Iphone? While I agree that a lower price will increase sales, it will also reduce margins and affect profitability. I think Apple's doing great by not having to sell a phone at $99 and hope the carriers give them a large enough payback. Also I don't think Apple wants to set the price artificially low to gain customers because they would cannibalize the IPOD touch sales if the Iphone were cheaper.

[erntheburn]

I simply don't understand how Mr. Sullivan comes to his conclusions, and how one might frind his analysis credible. As many responders have pointed out, there are a mutlitude of conclusions one can derrive based on similar behavior from Apple.

His analysis is a logical fallacy, commonly refered to as questionable cause.

[CharlesLloyd]

Funny how Todd wants to play bear on Apple but then he sells $280 calls! Real brave bear move there. Why not sell the $150 calls? Delta would probably have been 5x and then you could really show how certain you are of your bearish call.

[spaceage]

"Disclosure: Sold Apple $280 calls in Jan."

Wow, now there's a guy with balls...if you keep it up, you might be able to move out of the trailer park.

A historical FYI: the iPod wasn't (and current models still aren't) "less for less". The first model had a 5GB HD, which had only been done by one other niche player at the time it came out. It was (and still is) a "more for more" strategy, like the iPhone and the Mac. Notice the theme?

[David Lentz]

User 92985 -- Todd is allowed (encouraged) to note his bearish position, just as folks who write puff pieces to pump up their bullish positions do -- nobody should slam him for that. You are correct though, that if he really believed in his logic, he should have either sold calls at much closer to the market price at the time or better yet, bought puts. He could as well have sold July 1000 GOOG calls. It just doesn't strike me as all that bearish a position to take, given his spin on the company.

His bogus logic and assumptions are another matter entirely, and previous comments have adequately covered those issues.

My own thinking (BTW, I'm long-term long on AAPL, buying Jan'10 100 calls) is that both AAPL and RIM will do OK for some time, with AAPL blowing RIM out of the water on a comparative basis in terms of revenue and profits.

The iPhone has breathed life into the smartphone markets, and the rising tide will lift all the players in that market space. Prior to the iPhone, RIM had this market space pretty much to themselves, and they have exploited the corporate connections in a very adroit manner. Apple is going after the consumer markets first, and perhaps later (if ever) they will target the corporate smartphone market space.

Apple will find it difficult to crack the corporate markets, but I suspect that with AT&T helping them, they will exert sustained pressure on RIM in the coming months. AT&T is a formidable competitor in the corporate communications world, and RIM lacks other product lines to support them when margins thin out in the heat of actual competition. I don't see how RIM can last, and expect them to be eventually acquired by some cellular company.

Despite my bullish position in AAPL LEAPs, I don't really mind if the stock continues to sink -- and in fact I rather expect it to, as history leads me to expect a low in the July-August time frame due to seasonal factors, when I shall be getting more serious about loading up with AAPL LEAPs.

Trying to time the markets on a short-term basis during turbulence like this strikes me as lunacy. I'll buy a bit over time, increasing as things deteriorate, with a target of at least a year away.

[vnewspaper]

RIMM's CEO just gave a mid quarter update of subscriber growth yet made no assertions regarding how that affects top line revenue or profitability. This reeks of the days of 2000 when people made ridiculous statements that would send a stock flying. Any CEO worried about making statements is more worried about the stock price than his company's execution. RIMM statements, followed by two upgrades by junior analysts in the following days is a bit sketchy. We are not in a market that prices in growth anymore...fundamentals will be judged and at the end of the RIMM's stock price is unjustified at a 58 PE. Apple/GRMN/GOOG have been knocked off their perch and so will RIMM (again).

This is an irresponsible post. We'll know more once Apple and RIMM release their next set of earnings in April.

[sf94127]

Yeah, another article based on idle speculation. The standard for what you can publish on the internet is way lower then the paper press, at least papers like the WSJ, WP, and LAT.

[JIM]

Experts abound on this site, unfortunately, expertise itself is exceedingly rare, Todd...

[User 106669]

Mr. Sullivan I would like to call you a deuchebag but I will refrain, instead I will let the other comments here do it for me. Go back to journalism school.

Rumor + Rumor does not = True

LOL

[Oh Blah DeeBlah Dah]

RE: "Research in Motion (RIMM) released updated subscriber growth and unlike Apple (AAPL), they are not seeing a slowdown."

Apple did NOT say it is experiencing a slowdown in iPhone subscribers. Apple gave seasonal revenue and earnings guidance that Wall Street did not like.

Apple NEVER said, nor implied, that its iPhone subscribers are slowing.

Maybe when the quarter ends, iPhone subscribers could be UP.

[Argon]

- "We now know people are still clamoring to buying smarts phone, just not iPhones."
But we all know that the iPhone hype was catalyzing the subscriber growth of smartphones and ... Blackberry!

- "Apple was able to charge "less for less ... In a slowing economy, people will choose price for a commodity like device.”
I agree with you. Apple will make a low-cost iPhone for more countries and wireless carriers.

- "the Blackberry is a superior product and thus the reason for diverging sales trends."
Apple has great products and iPhone is the future of smartphones and maybe mobile computers. Google and Mobile World Barcelona prove it.

Blackberry is only a good classic phone linked to more carriers.

[ProudCanadian]

AAPL and RIMM are 2 sure bets. But RIMM is definitely years ahead.

[JIM]

What a piece of crap. Toad Sullivan should be ashamed of himself.

[dithers]

Sorry Todd, but the blackberry is a trend, not a good or even superior phone.

There is NO comparison with the iPhone - watch as Apple ramp it up and drop the price - you think Jobs is just sitting around drinking beer or something?

Watch the next quarter from Apple BLOW AWAY the guidance.

RIMM at 58 p/e is NUTS - cant last, wont last - more subscribers, less revenue? Oh dear.

[JIM]

What do you call yourself, Toad? A writer, an analyst, and investor? You don't seem capable of any of those vocations if this article is any indicator...

[T Muller]

Jobs doesn't want to sell iPhones to low-income people at $99 dollars- That could tarnish the brand. Apple might not want every one to afford them, people pay a higher price for brands that represent status. What would think would happen if Rolex, Armani, Tiffany were sold at Wal-mart? Or even Macs or iPhones? Nobody would buiy them. Hurt Louis Vutton with the knock offs sales of the authetic were hurt. Apple doesn't need to sell to everyone.. margins are very high and sales are good. ROIC is very high, investors can't complain to Apple the stock got ahead of it's self. Eventually I bet, there will be a cheap iPhone (probably a iRing or iCall ) like the iPod shuffle, but it will so stripped down that it won't cannibalize the iPhone.
the iPhone

[jcrash]

I think you get the gist of what I would say given the comments above.

Your article is based on RUMORS and suppositions. I would wait for the real numbers before you embarass yourself further.

[eldernorm]

OK, we have all jumped on Todd and some of it is totally justified. Todd, big slap on hand. "Bad Boy!"

But what I find really encourging is that there is an out pouring of comments by intelligent people putting him to task. A few years ago this would not have happened. If you did not like Microsoft, you spoke gently. Now people are not afraid to speak against Microsoft and when someone adverts for Microsoft and against a company like Apple, there is an outcry (where its justified of course).

I take that as a very positive sign. Writers write better when there is a mindful public that reads and comments.

en