Seeking Alpha
Hedge fund manager, long/short equity, value
Profile| Send Message|
( followers)  

Research in Motion (RIMM) released updated subscriber growth and unlike Apple (NASDAQ: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 (NYSE:VZ) and Sprint (NYSE:S) in their Blackberry promotions. Even AT&T (NYSE: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.

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