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  • What Will Happen To RIM In 2013?

    I'm going to write some things about RIM (Research In Motion)...

    First of all, I don't think it's a good idea to buy/sell stock with a hot brain or excited heart before you do a lot of research, no matter the stock is oversold or overbought. Specially, it's import to jump out the thoughts of as a RIM investor or fans. Look into the data you can find out and look around the people, what are the other people thinking? We should not make any decision just based on the comments or expectation.

    Second, let's look at the data from comscore: (Unit is million)

     

     

    Date(by the end of the month)

    total of smart phone users in US

    percentage of Android

    count of android

    percentage of iPhone

    count of iPhone

    percentage of BlackBerry

    count of BlackBerry

    percentage of Windows Phone

    count of Windows Phone

    2010-Jan

    42.7

    7.10%

    3.03

    25.10%

    10.72

    43.00%

    18.36

    15.70%

    6.70

    2010-Feb

    45.4

    9.00%

    4.09

    25.40%

    11.53

    42.10%

    19.11

    15.10%

    6.86

    2010-Mar

             

    2010-Apr

             

    2010-May

    49.1

    13.00%

    6.38

    24.40%

    11.98

    41.70%

    20.47

    13.20%

    6.48

    2010-Jun

             

    2010-Jul

    53.4

    17.00%

    9.08

    23.80%

    12.71

    39.30%

    20.99

    11.80%

    6.30

    2010-Aug

    55.7

    19.60%

    10.92

    24.20%

    13.48

    37.60%

    20.94

    10.80%

    6.02

    2010-Sep

    58.7

    21.40%

    12.56

    24.30%

    14.26

    37.30%

    21.90

    10.00%

    5.87

    2010-Oct

    60.7

    23.50%

    14.26

    24.60%

    14.93

    35.80%

    21.73

    9.70%

    5.89

    2010-Nov

    61.5

    26.00%

    15.99

    25.00%

    15.38

    33.50%

    20.60

    9.00%

    5.54

    2010-Dec

    63.2

    28.70%

    18.14

    25.00%

    15.80

    31.60%

    19.97

    8.40%

    5.31

    2011-Jan

    65.8

    31.20%

    20.53

    24.70%

    16.25

    30.40%

    20.00

    8.00%

    5.26

    2011-Feb

    69.5

    33.00%

    22.94

    25.20%

    17.51

    28.90%

    20.09

    7.70%

    5.35

    2011-Mar

    72.5

    34.70%

    25.16

    25.50%

    18.49

    27.10%

    19.65

    7.50%

    5.44

    2011-Apr

    74.6

    36.40%

    27.15

    26.00%

    19.40

    25.70%

    19.17

    6.70%

    5.00

    2011-May

    76.8

    38.10%

    29.26

    26.60%

    20.43

    24.70%

    18.97

    5.80%

    4.45

    2011-Jun

    78.5

    40.10%

    31.48

    26.60%

    20.88

    23.40%

    18.37

    5.80%

    4.55

    2011-Jul

    82.2

    41.80%

    34.36

    27.00%

    22.19

    21.70%

    17.84

    5.70%

    4.69

    2011-Aug

    84.5

    43.70%

    36.93

    27.30%

    23.07

    19.70%

    16.65

    5.70%

    4.82

    2011-Sep

    87.4

    44.80%

    39.16

    27.40%

    23.95

    18.90%

    16.52

    5.60%

    4.89

    2011-Oct

    90

    46.30%

    41.67

    28.10%

    25.29

    17.20%

    15.48

    5.40%

    4.86

    2011-Nov

    91.4

    46.90%

    42.87

    28.70%

    26.23

    16.60%

    15.17

    5.20%

    4.75

    2011-Dec

    97.9

    47.30%

    46.31

    29.60%

    28.98

    16.00%

    15.66

    4.70%

    4.60

    2012-Jan

    100

    48.60%

    48.60

    29.50%

    29.50

    15.20%

    15.20

    4.40%

    4.40

    2012-Feb

    104

    50.10%

    52.10

    30.20%

    31.41

    13.40%

    13.94

    3.90%

    4.06

    2012-Mar

    106

    51.00%

    54.06

    30.70%

    32.54

    12.30%

    13.04

    3.90%

    4.13

    2012-Apr

    107

    50.80%

    54.36

    31.40%

    33.60

    11.60%

    12.41

    4.00%

    4.28

    2012-May

    110

    50.90%

    55.99

    31.90%

    35.09

    11.40%

    12.54

    4.00%

    4.40

    2012-Jun

    110

    51.60%

    56.76

    32.40%

    35.64

    10.70%

    11.77

    3.80%

    4.18

    2012-Jul

    114

    52.20%

    59.51

    33.40%

    38.08

    9.50%

    10.83

    3.60%

    4.10

    2012-Aug

    116.5

    52.60%

    61.28

    34.30%

    39.96

    8.30%

    9.67

    3.60%

    4.19

    2012-Sep

    119.3

    52.50%

    62.63

    34.30%

    40.92

    8.40%

    10.02

    3.60%

    4.29

    2012-Oct

    121.3

    53.60%

    65.02

    34.30%

    41.61

    7.80%

    9.46

    3.20%

    3.88

    (click to enlarge)

    Third, there are some things I want to mention by my personal experiences.

    1) The life cycle of OS (operation system)/software is totally different from the life cycle of hardware. Usually, a mobile chip will be out of date in two or three years. But, as an OS, it will take several years to be mature after it's launched and widely tested/used. There is NO ANY RELATIONSHIP between the OS born date (earlier or later) and if it's (more) advanced. Linux/Windows have been created for tens of years. They're still the most advanced OS. Another thing I want to mention is generally it's pretty hard for a new born OS to replace the existing mature OS which have token over more than of half market share, even the new OS is pretty, pretty... good, except it's a revaluation, like the first iPhone launched in 2007.

    2) RIM had 80 million subscribers in 2nd quarter in 2012. I have no doubt about it. But it's a big question mark to say that "RIM has 80 million loyal subscribers and 70% will upgrade to BB10". Per the data from comscore, RIM used to have 20+ million subscribers in US in 2010. Today, by the end of Nov 2012, it only has about 9 million subscribers. Almost >50% users have already switched to other platforms in US. And there is no evidence that the running off of RIM subscribers in US has been stopping. So I think it's unfair to say that RIM has 80 million loyal subscribers, except intending to cheat people. So, how many are loyal RIM user in the 80 million subscribers? From different prospect view, different person may have different answer. From my personal aspect, a few, couple of millions at most. Maybe it's more appropriate to say: "RIM has 80 million subscribers and 70% are loyal users among the users who will upgrade to BB10"

    3) Good reviews don't mean good sales. There always are big gaps between good reviews and good sales. It's easy to find out tens of products which were propagated how good/great/perfect they were. Most of them failed by the cold realities happened in market sales except a few succeeded. Don't rely on the good comments, specially, from partner although they are import to listen to.

    4) What is behind the platform?

    IOS/iPhone = Apple.
    Android = Google + (90%) Samsung/LG/HTC/Motorola/ZTE....
    BB = RIM
    Windows phone = Microsoft + Nokia + (10%) Samsung/LG/HTC/ZTE....

    (A few days later, I did a bit more analysis) According to the new Kantar Worldpanel data, and by more data I checked, I think RIM only has about 7 million subscribers in US by the end of Nov 2012, and it will continue to lose millions of subscribers in US market in Q4 2013(from Dec 2012 to Feb 2013) after RIM has confirmed that BB10 will be launched on 1/30/2013, and even >50% subscribers in US have already switched to other platforms. I think there are three main reasons for those users who are still using BB devices in US market:
    1) some government agencies/enterprises who very concern the security and think only RIM can commit it. The subscribers in this category could be millions in US. Most of these subscribers will upgrade to BB10.

    2) Of course, no doubt, there are some loyal subscribers who like/love BB devices and are waiting to upgrade to BB10. Look at the people around, personally I think there are one million loyal BB users in US at most, and some are already included in category 1.

    3) Waiting for contract to end, they're already starting or will switch to other platforms.

    How about the new smart phone users or existing iPhone/Android users in US? I think it's pretty difficult for RIM/BB10 to attract users from iPhone/Android. No doubt, RIM/BB10 will attract a few new smart phone users or existing iPhone/Android users, but I think the number will be pretty small. Maybe RIM/BB10 could attract a bit more users by selling BB10 with lower price sub-$300 without extra fee or very low in next/next quarts before Apple launches the iPhone 6.

    I think there are no big differences between US market and Canada/UK/EU, just about one year earlier or later. IPhone and Android will continue to take over more and more market share in Canada/UK/EU, could be > 85%, only about < 15% market share is left to Windows Phone/RIM and other platforms. By the end of 2013, the migration from RIM to other platforms in US market will be completed and RIM subscriber base will be stabilized at couple of millions (< 1% market share in US). In Canada/UK/EU market, the migration will be completed in 2014. In the emerging market, I think RIM will be kicked out by Asia manufactures and Nokia eventually in 2015, just like what's currently happening in China/Indian. Finally RIM will survive as a small corporate with couple of tens of millions of subscribers (<1% global market share) or be bought in 2015. At present I think there is few company who can/will buy RIM because it will take more than 10 billion dollars, and I don't think it's a good deal or timing for a company to buy RIMI at present. This is what I'm predicting about future smart phone market.

    I also think RIM management team did a good job up to now. But the problem is they didn't turn around the down trend, even after the increment of subscriber base in emerging market had saved a lot of time/chances for RIM. And the slower speed of movement/switch in enterprise market (than individual market) had also saved a lot time for RIM. Otherwise, RIM subscribers had already slipped over in 2012, as what Wall Street was expected. I think the down trend is not changed. It's just delayed one year.

    Who may buy RIM potentially at present (before June 2013)?

    1. Lenovo/Huawei/ZTE… Can't offer 10 billion dollars to buy a company. Even banker loan them money. The Canada/US government won't approve the deal.
    2. Japanese manufactures (Sony/Panasonic…) is very busy, busy saving themselves.
    3. Korean/Taiwan manufactures, Samsung repeat 'no'. It's developing its own OS with Intel and Japanese telecom. LG/HTC is facing a lot pressure from Samsung. I don't think LG/HTC think can compete with Apple/Google/Microsoft from OS aspect. They will still co-operate with Microsoft/Google and focus on their own hardware manufacture.
    4. Apple/Microsoft/Google already has its own Mobile OS. It will be interesting if they buy a new mobile OS from competitor.
    5. HPQ is not a 1oo billion company anymore. If the board/CEO dare to offer another 10 billion to buy a company again, I guess they will be fired by staff/shareholder right way.
    6. Dell/Oracle is not HP. Michael Dell/Larry Ellison is not Leo Apotheker. They are smart. They only buy the company who can make money or help them to make money.
    7. Intel is facing pressure from ARM chip. Per history, it looks Intel is still focus on its chip. And only has a few of interesting to develop its own OS, instead of buying new OS. IBM is most focus on the backend system integration.
    8. Facebook/Amazon is still focusing on network/consumer marketing.

    Personally, I think IBM/Intel/Dell/Oracle/Facebook/Amazon is the company who can offer 10 billion dollars to buy a company. Since 10 billion is very big number. It has to be clear and evident that RIM is worth the amount, additionally, the buyer has to figure out if or how compete with Apple/Google/Microsoft.

    Value RIM from subscriber base aspect:

    In Q3 2013, RIM has 79 million subscribers, and 950 million service revenue which is the most possible to make profit for RIM.

    If we assume 10 million subscribers in US and 10 million subscribers in Canada/UK/EU and the average monthly fee is $10, the service revenue from these regions is about 600 million. That means the monthly fee for other 60 million subscribers in emerging market is about $2. $200 ~ $300 smart phone with $2 monthly fee was competitive two or one year ago because the price of iPhone and most of Android is higher than $300. Things started to change from the end of 2012, the android manufactures and Nokia already started to provide good phone with lower price < $300, some could be $200 or $100, or even lower than $100. I don't think the current BB devices or BB10 can't compete with the lower price android/Nokia smart phones in emerging market. The big difference between subscriber in emerging market and US/Canada/UK/EU market is: the existing users in US/Canada/UK/EU concern the security mostly. The user in emerging market buys the BB device just because of its value. There is no stickiness. The RIM subscribers in emerging market will/could shift to other better/lower price android/Nokia phone quickly. RIM is still losing millions of subscribers in US in one quarter; meanwhile the speed of increment in emerging market is slowing down. I think 80 million subscribers in Q2 2013 is the maximum value RIM can reach. And it will be completely kicked out from emerge market by the end of 2015.

    If BB10 OS could be licensed to and accepted by Asian manufactures. I think it depends on:

    1. How advance the BB10 OS is, comparing to Android/Windows Phone/IOS.
    2. The ecology (including market) of the BB10 OS. I think the ecology of an OS is the reason that most of manufactures put 90% resources on Android and on 10% on Windows Phone.
    3. The license fee/cost/profit. How much resources/cost/profit to design/develop hardware for a new OS.

    So I think there is no clear evidence that RIM is worth 10 billion dollars for IBM/Intel/Dell/Oracle/Facebook/Amazon to buy it at present.

    Maybe RIM will be bought as a small corporate about two years later.

    Final, a few questions left to readers:

    1) What's meaning of RIM subscriber increment in emerging market, comparing to the loss of subscriber in US market? What're the opportunities and risks in emerging and US market?

    2) What does RIM financial report tell you? I guess it's optimistic and optimistic prediction, either from revenue/cash aspect, or subscriber base aspect. Is there anything which RIM management team knew but missed or hided from you in the financial reports?

    3) What do you expect in RIM in 2013?

    4) Do you think if there is space for the third platform, besides iPhone/Android? If yes, which will be third one? Windows phone, RIM or other?

    In international CES on 1/18/2013, a lot of smart phone manufactures will present their new smart phones; 1/30/2013, RIM will launch BB10; 2/23/2013, Nokia and some manufactures will launch their new smart phones in MWC; Samsung maybe launch its Galaxy IV in April 2013, and Apple may launch the iPhone 6 in June or Sep in 2013.

    Let's wait and see, 2013!

    Disclosure: I am short RIMM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional Disclosure: I am not asking anyone who is reading this article to buy or sell any stock. This only thing I hope here is the data/analysis provided above will help people to make his/her own decision if he/she wants to buy and sell some stock.

    I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Dec 28 2:28 AM | Link | Comment!
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