December 2011
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Day December 19, 2011

The parable of RIM

Here are the highlights from RIM’s latest quarter:

  • 14.1 million BlackBerry smartphones shipped, 13 million sold through
  • 150k PlayBook shipped with sell-through slightly higher. 800k PlayBooks shipped so far.
  • BlackBerry subscriber base up to 75 million
  • High growth cited for U.K., France, South Africa, Mexico and Argentina, Indonesia, Saudi Arabia and South Africa. RIM is the #1 smartphone vendor in the Latin America and Caribbean region. Sales outside the US, UK and Canada were 61% of revenues. US is now 20% of sales, UK 11%.
  • Hardware growth outside the US was 56%
  • There are 630 carriers
  • 50k apps in App World with 5 million downloads per day
  • Forecasting 11 to 12 million smartphones next quarter

Given the channel fill with a new product, the device business was marginal at best. The company obtained -1% growth y/y in units but 31% sequential growth from a transitional quarter. The average selling price (inclusive of service revenues) is $354 and about $280 excluding service revenues. I estimate that operating margins have dropped to about 11%. Not a good story, but one we have been warned to expect.

But a crucial new twist to the story is that RIM announced that they don’t expect new BlackBerry 10 devices until late next year. That came as a surprise and the stock sold off significantly, valuing the company at well below book value.

Stepping back, the biggest surprise is that the company seems to have had no plan for sustaining itself.

Let me explain.