[Updated] RIM's sales down 15% in the US, up 112% outside the US

First, a round-up of the quarter’s numbers:

  • 14.2 million devices shipped, sell-through: 12.3 million
  • expect to ship 14.5 to 15 million units in the next quarter
  • ASP of approximately $315
  • US, UK and Canada are 56% of sales
  • US represented 34% of the total revenue
  • Last year US represented 57% of revenue
  • BlackBerry Torch launched in over 75 new markets, Torch launched with the $99 pricing from AT&T
  • BlackBerry Curve 3G launched with 118 carriers in 48 countries
  • China Mobile introduced BIS for small-to-medium sized businesses. The service starts at $14 per month
  • App World applications grew 60%
  • More than 16,000 applications available
  • 2 million downloads daily
  • 1,000 vendors registered for PlayBook apps
  • Revenue: $5.5 billion
  • Net subscriber additions: 5.1 million
  • Top three customers: 12%, 9%, and 9% of revenue
  • The same quarter a year ago: 25%, 13% and 10% of revenue
  • Service revenue in Q3: $835 million
  • Software revenue: $78 million
  • Gross margin in the quarter was 43.6%
  • Cash: $2.5 billion

For comparison, here are a select few vendors’ smartphone reported shipments. RIM is the first to report and we’ll be hearing the the rest by the end of January.

The number most RIM “bears” focus on is the new subscriber additions. At 5.1 million out of 14.2 million units sold implying that the new subscribers added per unit sold is 0.34, a new low.

The bulls will argue that the gross margin is healthy and slightly higher than anticipated.

My observation is that the company is finding growth outside its traditional markets. Given the figures above, the US went from $1.65b in revenue to $1.87b; a mere 13% growth while the company experienced 89% overall growth in revenues.

The following chart illustrates the situation:

Of the total increase in sales ($1.6 billion), the US contributed -15% while the rest of the world accounted for 112%.

This can be seen as positive news since RIM has been weak internationally for many years and they really need to penetrate world markets. However, a -15% growth in the US is implies significant share loss in a rapidly growing and traditional stronghold.

  • dchu220

    I've never owned a BB, but…

    The Blackberry may be perfect for customers who are not yet ready to make the jump to Android/iPhone.

    Could wireless data costs be holding back adoption of Android/iPhone in developing countries?

    • asymco

      Not just data costs but data itself may not be available. Furthermore, even prepaid smartphones is a source of opportunity for RIM. According to their CEO: the prepaid smartphone market in the U.K. alone grew 245% year-over-year versus postpaid at only 65% growth, and RIM is taking advantage of these dynamics.

      The question for RIM (and for Nokia) is what happens when your users want to move up to a higher level of device? How sticky is your platform? How high the switching costs? How loyal to the brand? We've witnessed a remarkable willingness for users to switch mobile platforms, unlike in the PC world.

      • Rob Scott

        "Could wireless data costs be holding back adoption of Android/iPhone in developing countries?"

        In the developing country I have experience with:

        No. Data cost the same for all platforms and they start at a measly 10MB. Except for the iPhone on contract all other smartphones are available without the need to take on a data package. All phones are available on prepaid without any need to take up data.

        @Horace – All the carriers offer data with speeds up to 21Mb/s.

        Blackberry has been growing exceptionally well at the expense of Symbian (not necessary Nokia), Android is heavily promoted by all carriers but the uptake has been lustre partly because the suppliers of Android have a certain history e.g. Motorola.

        Cannot say much as I work with this…

      • If there were stats on the age of that 245% increase I'd say it was teens and tweens. Blackberry is in the same market as Nokia's C3 qwerty non-Symbian non-smartphone here which is a damn good phone for the money but without BBM. If your social circle is on BBM, you get a Blackberry (cheaper the better). If they're on Facebook you still get a Blackberry usually unless you pick up a C3 or other non-smartphone on a carrier with free Facebook (most of the UK carriers do free Facebook without a data plan).

  • BB appeal globally – cheap enough for prepaid users, viral use of BBM, QWERTY for SMS, apps not actually that important compared to gossip

    • asymco

      Exactly. Consumer messaging is a killer app. Only concern is that this is not really a "smartphone" type of usage. What we're seeing is a device hired to do a single task, rather like camera phones. The trouble for the platform is that once the user moves up in their expectations, the Blackberry is not as deep an investment as a phone that is an app platform.

      • Rob Scott

        I have heard this BBM thing so many times but for all the data I have looked at I cannot prove it to be true. I am a blackberry user myself and have never used BBM. I know one or two people who use BBM among the 200 or so people who are friends/family/co-workers who use blackberries. We however all without exception are on twitter and/or facebook. Without this heavy use of BBM RIM is enjoying similar growth numbers like it is enjoying in the UK and has become the dominant platform.

        Early indicators suggest that the iPhone and in time Android will be the number one and two OSes. Android because of the sheer number of devices on offer and iPhone will depend on what Apple does come June. For Apple to get its deserved share it will need to address the $150 – $300 price range and sort out supply issues. No need to do anything else as the iPhone sells itself.

      • bbm could have a reverse network effect on rimm….

  • Riley

    Rim's next quarter is going to be horrible. They stuffed the channel this quarter and need to bank on more BOGO deals to dump inventory. If Playbook fails this company is the next Palm.

    • Intosh

      Yeah right, because channels keep stocking inventory even if they aren't selling.

      "If Playbook fails this company is the next Palm."

      That's such an idiotic statement. As if the entire company's future is resting on the tablet market. Didn't you get the memo? RIM is making close to a billion $ in profit in the SMARTPHONE market. If the Playbook meets some success then good for them; if it fails, the tech is still heading to their smartphones, their bread and butter products.

  • rimm is now less reliant on selling "subs"…as such aren't they now playing a dangerous game of selling handsets at ever lower margins, especially as the Chinese exploit their Android opportunity? Another danger is Nokia getting their act together and fixing symbian on mid range smart phones. that is a glacially slow process but if they ever start competing with a better user experience, that will hurt rimm. bottom line is that they are becoming irrelevant in USA. Palm and Microsoft will be pushing hard in 2011 in USA. And it's only a matter of time before android at sub $150 price points is normal in emerging markets. this is why there is still a lot of rimm skepticism from investors.

  • Thinking about it – RIM is displacing Nokia's traditional role of selling top-branded smartphones-used-as-featurephones for prepay users. And in general, prepay users don't buy monthly "subscriptions" to value-add services.

    (Note to US readers – about 75% of the world's mobile users are prepaid, and buy unsubsidised phones. Also, non-US prepaid does not involve a regular monthly plan, but ad-hoc "top ups" of credit)

  • Hugely impressed with the level headedness of the comments.

    Regarding Nokia and Symbian, I read yesterday that they plan quite a lot of enhancements to the Symbian UI. Many observers tend to agree that the Symbian OS is pretty mature, and has the best power and CPU management and best multitasking. Should be interesting with the hardware changes they’re planning; dual core 1GHz CPU, and, and.. They’re under a lot of pressure to deliver

  • Data costs – South Africa*

    A network*

    R9.25 for 8MB (price per MB decrease through a range of choices)
    R289 for 1.2GB (1229MB) (a few more choices available)

    Btw., BB has become huge here pretty fast.

    • asymco

      Thanks for this input. Very powerful testimony.

  • gctwnl

    The bears are right. If additions are low we are taking about replacement only (and given the growth in RoW, this means that their customers are leaving them in the US, 13% growth should have been more from replacement alone).

    This means that they are indeed in that phase that by lowering margins they are able to speedily get their late adopters on board, but when they have those, there is not enough new additions to fuel ongoing growth and the desertions will be more.

    If they are able to get a decent strong handhold in RoW by going 'native' they might still carve out a niche. And the cheap messaging for young people is also a strong point

  • I believe US Revenue was 2.22B Q3 last year, thus US sales actually dropped.

    • asymco

      You may be right. I indexed off the comments "US represented 34% of the total revenue, Last year US represented 57% of revenue"

      • Those figures are correct, you must have a bad total revenue number from last year which was 3.924B.

        Did you notice Canada revenues? They had never topped 300M before….. hitting 506M this quarter which was up almost double from 257M same period last year. I wonder if that might be partially related to the huge jump in channel inventory. In addition, supporting North American user net adds which were running about 2M per quarter before plummeting to 350K in August, and then recovering somewhat to ~1050K last quarter.

      • asymco

        I made the mistake of comparing with device revs, my bad. Fixed the headline and the chart.

        The picture is more lop-sided than I had suggested. US down 34% in revs is a disaster from a share point of view.

        Amazing how Canada is now 9.2% of revenues. Some are saying they are stuffing the channel in order to refute Jobs' claim that iPhone beat RIMM once and for all. Who knows. I

      • ljp

        RIM addressed this rise in their conference call, they are moving into markets that tend to take on more inventory,as well as take longer to pay, than the US companies that like to run very lean.

        I think RIM has a good enough track record to be making the real case rather than the analysts who have been beating the doom drum for 18 months while constantly raising their earning estimates. The spin before earnings was that RIM was losing favour with carriers, such as Verizon, but now they say the carriers are taking on extra inventory? That seems pretty shaky.

        And if they were stuffing, why is the guidance higher? Some negative analysts were guiding for a 12 million device Q4 2011 quarter, if RIM wasn't seeing the sell-through of the extra inventory orders I don't think they'd guide millions of units higher than the analyst estimates.

        As for Canada, even in a province like Saskatchewan that has just over a million people, they have over a hundred thousand active BlackBerry devices on Sasktel alone not counting the subscribers on the other networks. That's in a province with three other carriers offering the iPhone. Some people just might have to admit that there are consumers that like RIM's devices.

      • asymco

        I did not complete my comment above. I was going to say:

        I usually don't believe "stuffing" hypotheses have merit for companies with a lot of coverage. It's suicidal for management to engage in this behavior.

        Nevertheless, the market is very negative on RIM.

      • ljp

        I was addressing my comments more to the ideas of channel stuffing or the BlackBerry having no appeal rather than a direct comment towards you. I think the cases against RIM would bear more weight if the analysts didn't contradict themselves so much. And you're right, stuffing is the action of a company that is spinning out of control and is just trying to stave off collapse. That's not really RIM's position given their financials. The next quarter report is only three months away and any such actions would come to light then.

        The negativity is unbelievable given the revenue and profit growth. A bullish analyst commented that the stock has gone down while he has had to adjust his EPS guidance 23% upwards. But this is the fourth time RIM has languished in a period of negative sentiment from the market.

        There are concerns, but they are not exactly unique to RIM. I think some have a hard time getting over the idea that the technology space can see many players just like every other market. Too many years of Microsoft dominance?

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  • JP Chicago

    I think such a rapid implosion of the US market for RIM foreshadows a global trend. Activations in the US (not published) are likely much lower than elsewhere. And this would still leave a tepid global pace.

    Out of the 14.2 million units sold, how many are being used by people who use iPhones and iPads after work? Many enterprise RIM users at work are iPhone users at home, just as Microsoft can't keep iPhones away from their employees. If we could discount the overlapping iPhone/iPad user base from RIM enterprise sales, we may see that RIM adoption is driven by organizations that do not offer iPhone.

  • ljp

    But sell-through was only 12.3 million, so the net adds would be higher than 0.34. Would it not?

    • asymco

      That's right, but correct me if I'm wrong, this has been the measure historically.

      • ljp

        I believe so, but the ramp up in late quarter orders have thrown it out a bit. I also think the measure might not be a good indicator anymore of RIM's business now with their move into the pre-paid markets. Which is one of the reasons they have stopped reporting the net adds. The ratio can be spun as if they are just selling to an installed base and not growing instead of getting additional sales in the purely voice/text crowd.

        If they weren't moving into new markets that act differently than their traditional ones, it would be of more concern. But they are also developing strategies with carriers to bring over the voice/text crowd into the data world. As they have discussed on their calls, the market is going through changes and they are positioning themselves for the future. Some of these plays will take time, like China, but that's not what some want to hear. They want the appeasement today.

        The US is of course important, but it would be of more concern if the US economy was experiencing high levels of growth or was fully saturated with smartphones.

      • asymco

        I noted the move to emerging markets when I heard about rapid growth in Saudi Arabia back in May this year. Observations from Latin America and Indonesia backed up this view. I went to London and saw as many Blackberries as iPhones among consumers. There were the news stories of governments in several countries considering bans on RIM due to their message protection architecture. The evidence is clear across the board that RIM is getting a lot of traction internationally. This last quarter really showed it in the numbers.

        I remember how the opposite was a cause of concern. There was a time around 2007 when RIM was accused of being too dependent on a handful of operators and on one country.

        All these are valid points, however I do find it striking that the US, their core market and one which has been growing overall, was not a market that grew for them.

        RIM deserves a lot of credit for finding growth world-wide, but it needs scrutiny for not finding it in the US.

  • tomas

    that Iphone or android is "a higher level of device" is a judgement
    I do not agree, many think bb or Nokia are better

    • asymco

      Better is meaningless. Is a disposable camera worse than a professional digital SLR? Not if it's the only camera you have with you when you have to take a picture.

      That's not the point of this posting. It's more about where RIM is going as a company. Are there signs of trouble or is the company being unfairly discounted?

  • tomas

    I wonder if there are any figures for sell-trough for Iphone? shipment was 14,1 million last quarter
    or is this only relevant for Rimm
    from sweden so sorry for misspellings 🙂

    • asymco

      Yes, Apple reports this number as channel inventory (usually in Q&A during the conference call).

    • RattyUK

      Er, last quarter sales were 14.1 million not shipments.

      • ljp

        Shipments are considered sales, it doesn't mean that everything that was shipped was a sale to an end user. The channel inventory for the iPhone during last quarter was 3.3 million an increase of 825000 units over the previous quarter. Yet no one was sounding the alarm over that rise because it was assumed there was a demand for them. Apple is demand, RIM is channel stuffing.

      • asymco

        You're right that these "alarms" are not consistent. Apple had its share of iPhone "stuffing" accusations in the early years. One notorious case dealt with the fact that early iPhone units were being smuggled out of the US leading to a discrepancy in the number of activations on AT&T vs. units sold.

        You have to take into consideration seasonality, new product launches, and product/geography mix. It makes more sense to use this type of channel analysis when the market is stable. The smartphone market is anything but.

      • ljp

        Agreed. I think some analysts are just floating that idea because their notes to clients resulted in a miss of a 30% climb in RIM's stock so they keep floating the "two quarters they collapse" idea hoping that a Verizon iPhone will do serious damage to RIM's sales. The change in the marketplace may be having the most effect on the analysts that follow the sector!

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  • dms

    Horace, how does the ASP compare to previous quarters? I'm curious about what kind of impact the growth in BRIC countries is having on the ASP.

    My assumption is that the movement away from the US market, with its strong enterprise tie-ins and carrier subsidies, towards countries like China where BB will have to compete more in the feature phone arena is gonna hit RIM hard on the ASP. Is this a correct assumption?

    • asymco

      ASP has increased slightly in the last quarter, but I think there has been a distinct drop over the last year as their strategy shifted. However they seem to be holding steady above 300.

      • Kris

        If they can keep the ASP steady, then they are doing well. If ASP and sales drop then they have lost it and for good.

      • ljp

        What will be key for RIM is not to follow Nokia's method of selling to the emerging markets in making cheap phones that they lose money on just to grab share. If they can keep their entry-level phones such as the 8500 series that has higher margins even with the lower price point as their driver for the lower income consumers they will continue to do well.

        There has been the talk that cheap Android handsets will be threatening RIM in these markets but LG tried the cheap handset route and it didn't work well for them. The problem with cheap handsets is that…they are cheap. It's also BBM that gives them the advantage as has been previously remarked upon. BBM is a miniature social network rather than just a cheap text replacement and I think that has gone unrecognized by many.

      • asymco

        Great comment. Tweeted the part about mini social network.

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