Throughout the time I have been bearish on Research In Motion (RIMM), permabulls pointed to the company's apparent foothold in the enterprise market as its saving grace. As I have argued, the intangible story often tells much, if not all, of what you need to know about a company and its underlying stock's fate. Consider the perceived battle between RIM and Apple (AAPL) for corporate customers.
Over the last year or two, a clear trend has emerged. It's evident if you ever fly on an airplane, particularly one packed with business travelers. Increasingly, people manage their personal and professional lives on mobile devices - smart phones as well as tablets.
From a consumer standpoint, I don't think anybody has tried to argue that BlackBerry remains relevant (or that Playbook ever was) in the face of market domination by iPhone, iPad and devices that run Google's (GOOG) Android platform. As consumers flock to iPhone and iPad, they, as employees, put pressure - even if subtle and indirect - on their employers to allow them to keep track of everything they do for business and pleasure on one device. Clearly, IT departments have answered the call.
In light of Apple's blowout Q3 2011 results, I decided to go back and trace the increasing traction iPhone and iPad have seen in enterprise. I used transcripts of the company's earnings conference calls that Seeking Alpha provides.
On Apple's Q1 2010 report, the company noted that over 70% of the Fortune 200 was deploying or piloting iPhone. During the Q4 2010 presentation, the company reported that over 80% of the Fortune 500 was deploying or piloting iPhone. The company also mentioned that over 65% of the Fortune 100 was deploying or piloting iPad.
Fast forward to the Q1 2011 call where, quite precisely, 88 of the companies that make up the Fortune 100 were deploying or piloting iPhone and nearly 60% of the Financial Times Europe 100 deployed or piloted the smart phone. On that report, Apple boasted over 80% of the Fortune 100 deploying or piloting iPad.
On the Q2 2011 telecast, the company stated that 88% and 75% of the Fortune 500 were deploying or piloting iPhone and iPad, respectively. On yesterday's Q3 2011 call, here's what Apple CFO Peter Oppenheimer had to say about enterprise statistics with relation to the two gadgets:
iPhone continues to be adopted as the standard across the enterprise with 91% of the Fortune 500 deployed or testing the device, up from 88% last quarter. We're also seeing great growth in scale worldwide. Today, 57% of Global 500 companies are testing or deploying iPhone, fueled by strong employee demand and opportunities for custom App development. Some examples of Global 500 companies supporting iPhones on their corporate networks include AXA, Credit Agricole, Nestle, Dow Chemical, GlaxoSmithKline, SUPERVALU and Comcast.
Turning to iPad ... Today, 86% of the Fortune 500 are deploying or testing iPad within their enterprises, up from 75% last quarter.
We are also seeing strong adoption internationally with 47% of Global 500 companies testing or deploying iPad. In the 15 months since iPad has shipped, we've seen iPads used in the enterprise in ways we could have never imagined. Companies like Boston Scientific, Xerox and Salesforce.com are deploying thousands of iPads and revolutionizing how their sales teams engage their customers. iPad is being used inside the country's top hospitals like HCA and Cedars-Sinai and in retail at Nordstrom and at Estee Lauder's Clinique counters. General Electric, SAP and Standard Charter have developed internal Apps for training, currency tracking and business process management to help make employees even more productive. And Alaska Airlines and American Airlines are using the iPad in the cockpit to replace paper-based navigational and reference information pilots carry with him on every flight.
Acting CEO Tim Cook added some color on the Q&A portion of the call:
And I think you'd really look at it fairly to be this far into the enterprise with a product that's only been shipping for 15 months in the case of iPad is absolutely incredible, because the enterprise is typically much more conservative and takes a long time to evaluate products. In this case, people are moving at a speed I haven't seen. Also in a group that's not thought of as enterprise like K-12, our K-12 generally takes a very long time for new product categories, but last quarter, we sold more iPads in K-12 than we did not. And to do that after just 5 quarters is absolutely shocking. We would've never predicted that. And so we feel very, very good about the different areas that iPad is being sold into. It's clear it has a universal appeal in many different markets from consumer to business to government and on and on.
For the record, Apple Investor Relations did confirm that Oppenheimer did not use Fortune 200, 100 and 500 interchangeably. During each call, he meant to refer to the actual subsets of the Fortune lists as he did.
To be fair, just because Apple says that X number of companies deploy or pilot iPhone or iPad does not mean RIM cannot claim the same companies as a customer. Some companies could use both (though I think that's unlikely). Or, worse yet for RIM, others could be present RIM customers thinking about making the switch to Apple.
In any event, here's what RIM management had to say on its Q1 2012 conference call last month about Playbook and enterprise:
PlayBook is now in the hands of over 1,500 enterprise customers in progressive stages leading to full deployment. As part of this process, customers are continuing to uncover new enterprise use cases for PlayBook, and we are working closely with global enterprise solution providers to provide powerful new solutions to take advantage of the unique capabilities of PlayBook.
We are working with Verizon to target enterprise accounts with PlayBook, and RIM has hosted a number of CIO events to highlight PlayBook throughout the U.S. this quarter.
Cisco, Citrix, IBM, HP and SAP are few of the platform and system integration partners that RIM has established joint product road maps with and plans for joint sales activities. The recent launch of BlackBerry Balance is also an important step in growing the penetration of BlackBerry smart phones and tablets in the enterprise market. And since launch, Balance has been a meaningful driver of BES upgrades, which is allowing customers to test and pilot the solution for broader roll out.
In the Q&A portion of that call, RIM Co-CEO Jim Balsillie did not tend toward being any more precise when he said: "We've got all these amazing things going on in credentials and enterprise ..."
What Balsillie said on RIM's most recent call represents a slight improvement from the imprecision, relative to Apple, displayed on his company's Q4 2010 call from March:
Many existing BlackBerry enterprise customers, including a good portion of the Fortune 500, will receive PlayBooks for review in the coming weeks. Many enterprise customers have told us that they have delayed their tablet deployment plans in anticipation of the PlayBook launch. For instance, the CIO at Manulife Financial has told us that they plan to deploy across all divisions in Canada, the U.S. and Asia, and PlayBook is the top of its list for its great performance, security, lower operating costs and employee productivity benefits. And Royal Bank of Scotland recently announced that it will be offering their research and strategy products via BlackBerry PlayBook in response to customer feedback ...
And then, of course, there's this gem that will go down in the archives of incompetence only Balsillie can stake claim to:
I've got many corporate clients that have approached us about each wanting tens of thousands, several tens of thousands of PlayBooks. And that is what they're looking at, that is what they're assessing, and they're looking at tablets, and they like the PlayBook architecture. Now obviously, you have to execute on these opportunities and deliver the product, and obviously, this is over some period of time. But when you look at the addressable market, it rolls up to a substantial opportunity, and we just have to execute into it. So yes, we have some good expected numbers on this. I mean, we're not guiding, so I can't say, but we certainly have substantial internal forecasts, we've made substantial parts procurement. We have - we've received a lot of indication, both from the channels and the end customers. We feel this is a winner.
A good portion ... I've got many ... Several tens of thousands ...
And, mind you, this "winner" might not even make it to air for a second season, even though RIM has refuted reports of PlayBook's demise. Rumors aside, compare Balsillie's waffling imprecision regarding PlayBook with Oppenheimer's and Cook's clear and to-the-point assessment of where iPhone and iPad stand. Is there any question that the pair trade here is long AAPL/short RIMM?
Disclosure: I am short RIMM.
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