Shares in RIM, the BlackBerry firm, fell nearly 8% after they announced earnings of $482 million, up from $223 million from the year-ago period on revenue of $2.24 billion. However this is not news. Look at RIMM over the course of a full year and you see the trend is unmistakeably upward (much like AAPL if you ignore that big drop in February/March.) So you have to ask – if their profits doubled then what’s the problem.
The problem is the next three months.
RIMM expect revenue to increase slightly over last quarter but they expect profit to be down (by around 1%). We’re still talking about margins in excess of 50% here but the most telling part, for me, is near the end of the Earnings Call transcript.
Jeffery Kvaal – Lehman Brothers
…to what extent are there other variables about pricing that we should be considering? Are you worried about overlap with the Apple customer base as well?
James L. Balsillie
I think the second half of your question doesn’t have particular relevance to our thinking…
Jeffery Kvaal – Lehman Brothers
Okay, so thanks. That sounds like you aren’t seeing too much of an overlap then, Jim, with the iPhone customer base in particular.
James L. Balsillie
No.
I don’t think they believe him.
BlackBerry has some stiff competition ahead when both the iPhone 3G shipa (in two weeks) and the Android phones begin to ship (speculating year-end). They’ll still do well because they already have a huge installed base and large corporations are not simply going to swap everything over based on these releases. But one of the hardest things on your laurels is resting on them.
I’m not a fan of the BlackBerry and this is based on having to support BlackBerry users when I was in Mac-Sys. I didn’t find the device a pleasure to use and that makes such a difference to me – and I think the realisation that computers don’t have to be awful is being realised by others as well.
The thing that made BlackBerry so compelling in the late 90s is being eroded by modern phones. Even the crappy Nokia I had for a loan phone had email and not enough people see the virtue in a push email system for it to be compelling by itself. And, as Apple and Microsoft have shown, push email is not something exclusive to BlackBerry.
Should RIMM be worried about AAPL?
Yes.
On April 2nd this year, RIMM announced the number of BlackBerry subscribers had passed 14 million – the BlackBerry has been on sale since 1997. To put this in perspective, Apple sold 6 million iPhones in far fewer countries in less than a year and they’re about to sell more than 10 million more.
In the Earnings transcript, James L. Balsillie said:
…once you decide to become a BlackBerry user, you kind of stay there for life.
Considering the 14 million, that’s kinda disappointing.