[Marc_Paradise]

We saw what happened last time. Heins was asked about service revenues, he gave generalized answers that seemed to imply that they had some ideas (service tiers, optional features) but no actual long-term plans in place. Down goes the stock - in spite of early AH trading sharply higher on actual earnings.

The question will come up again in this ER. Do you expect to hear a more satisfactory answer? And if not, do you think the result will be the same?

[peter9477]

I don't expect to hear a more satisfactory answer, but I also don't expect the lack of one to have as significant an effect on the stock this time.

I think last time, people had largely given up on RIM and when they imagined the loss in service revenue they just figured "the game is up".

This time around, I think people will know (assuming US launch starts off well) that BB clearly has previously hidden strengths and will ultimately be in a good position to capitalize on the new platform with future offerings. I don't think the markets will feel the need to see precisely what those offerings are yet, and I expect the uncertainty is already priced in.

All this works only so long as the other numbers are all positive. If they see the early sales doing quite well (presumably beating all the conservative estimates) then it's all up for now, IMHO. Adding service revenue later will just be gravy.

[richardat]

I agree...I don't expect to hear a better answer...I don't think they have one. However, the initial sales numbers will be front and center this time.

[silversun10]

the answer is to sell phones to new customers, as has been reported, perhaps about 40% switch back from other phones,
you can't lose service fees on those......

[Shanerredflag]

Agree with everything said...just want to add that the declining BIS fee question should get overshadowed by the percentage of switch overs...whether that is enough only time will tell.

Posted via CB10

[OMGitworks]

This is one of the issues why I have not put any money into BBRY lately. I think they can have a perfectly solid ER and a very solid launch and the market could still take it down after an initial pop or right away. I don't think they should, but given the track record and the general ineptitude which BBRY has handled past conference calls and ER, and the massive short interest, I am just too worried the good news will be pushed aside and any bad news accentuated. If you put a gun to my head and told me I had to either go long or short BBRY, that would be an easy long call, but since there is no gun, yet, I sit on the sidelines and enjoy the banter and ride.

[cjcampbell]

Assuming, and remember just assume, that the users remain the same at 79 million. This allows for some loss to the competition and some new from the competition. Now let's assume a 300,000 move both away and to. The 300,000 loss would equate to approx $2.7 million in lost service revenue, based on an average of $3/mth per user. Now lets look at the new arrivals with a very modest, for argument sake, profit margin of $100/device. That equates to $30million. Now take into acount all those that upgraded their device from a previous BB resulting in lost service revenue but far higher gross margin. And one more thing, BB10 is FAR more app centric than any previous OS from BB. With all the purchases of apps, games, movies, and music, there is revenue being generated that wasn't possible before..

I kept the numbers quite modest in order to be as objective as possible here. I could be WAY off on all accounts but it does make logical sense, in my opinion.

[Marc_Paradise]

Assuming, and remember just assume, that the users remain the same at 79 million. This allows for some loss to the competition and some new from the competition. Now let's assume a 300,000 move both away and to. The 300,000 loss would equate to approx $2.7 million in lost service revenue, based on an average of $3/mth per user. Now lets look at the new arrivals with a very modest, for argument sake, profit margin of $100/device. That equates to $30million. Now take into acount all those that upgraded their device from a previous BB resulting in lost service revenue but far higher gross margin. And one more thing, BB10 is FAR more app centric than any previous OS from BB. With all the purchases of apps, games, movies, and music, there is revenue being generated that wasn't possible before..

I kept the numbers quite modest in order to be as objective as possible here. I could be WAY off on all accounts but it does make logical sense, in my opinion.

Well - i don't want to be misunderstood. I don't think that service revenues are a long term problem. As they sell more handsets, open up licensing talks, etc... they become less relevant to the company's long term profitability.

My concern is more specifically how they're going to answer the question. Will they deflect again? What effect will it have if they do? What if they come out and say "We hear you but it does t matter."?

[cjcampbell]

I'd say it's tough to say. If the revenue is up this quarter, and they can show that App World is making money, it would be a non issue. Also, if they can show that new contracts for BES10, like the new German govt for example, are continuing, then again, it shows growth of revenue, not decline. Now of course these are all "ifs" but I have a feeling that come the 28th, it will be a good day. At least this time it will be before the market opens so if I'm wrong, I don't have to wait until the morning after to see the value in my account slashed drastically.

[RECOOL]

Service revenue is in the BES 10 support of other devices in form of licensing.BB are elite chess players they play many moves ahead dont worry about it.

[Sqoon]

Service revenue is in the BES 10 support of other devices in form of licensing.BB are elite chess players they play many moves ahead dont worry about it.

The last several years would suggest otherwise.

Posted via CB10

[Dapper37]

Very good analysis guys. My thoughts.
BlackBerry may not have enough data to get them out of the woods on this quarter due to the limited launch time frame.
The Shorts standing at 136,000,000 are not going to die easy!
If the data points to a clear success and a forward trajectory of growth, they will be in good shape.
Follow the call with a successful US launch and we may never have to look back!
If the numbers are not impressive and they bothch the call with poor wording, of course we go down. Temporarily IMO.
The US lanuch will have to be a disaster for the stock to stay down. I personaly believe the US launch will be decent, given current standings
BlackBerry HAS more cards to play. Good or bad out of this quarter they are going to play them.
I expect a drop but not a significant drop in service revenue in this quarter.

[Bbnivende]

I like BBRY long term but I do see a substantial drop in subscriber base this Q. Not sure how much but I do see BB7 and BB10 sales to be less than BB7 defections since BB7 sales have slowed.

[mikeycollins13]

People also forget app revenue coming

[Marc_Paradise]

People also forget app revenue coming

Have they reported that separately historically? Remember they've had it for years

[cjcampbell]

Have they reported that separately historically? Remember they've had it for years

Maybe so but they didn't have movies and music. That and there is a lot more space for apps now which, in theory, should result in more downloads than before. They may not have reported it as an individual revenue source but maybe they should this time to show a source aside from service fees.

Posted via CB10

[Bbnivende]

What about the large world wide launch costs that will hit this Q or are they going with some accounting amortizations.

[cjcampbell]

What about the large world wide launch costs that will hit this Q or are they going with some accounting amortizations.

Heins already accounted for that when he said that they shouldn't fall below $2 billion come this ER.

Posted via CB10

[Sqoon]

People also forget app revenue coming

You forgot that Apple does not make any money off of apps so it is likely that BlackBerry will not either

Posted via CB10

[cjcampbell]

You forgot that Apple does not make any money off of apps so it is likely that BlackBerry will not either

Posted via CB10

Are you sure? I am pretty sure that Apple takes a 30% cut from the apps.

Posted via CB10

[Sqoon]

iTunes costs apple over a billion a year, so while they make money, it isn't much compared to the amount of sales they make. It is not a good day to make money but people expect the services to be there.

Posted via CB10

[Zarpan]

iTunes costs apple over a billion a year, so while they make money, it isn't much compared to the amount of sales they make. It is not a good day to make money but people expect the services to be there.

Posted via CB10

Piper Jaffray calculated that Apple made about 2 cents in gross profit per app download (positive 19 cents per paid download, negative 2 cents per free download). I think the average is about 50 app downloads per smartphone now, so you could probably estimate app store gross profit per BB10 device at about $1 if you wanted to model it.

[kevinnugent]

Yeah, they don't make real money on the apps. It pays for itself but more importantly its a honey trap for consumers.

[Dapper37]

I like BBRY long term but I do see a substantial drop in subscriber base this Q. Not sure how much but I do see BB7 and BB10 sales to be less than BB7 defections since BB7 sales have slowed.

Its possible, maybe a million or two on the high side! this news should be discounted/shadowed by the items of importance going forward.
If the international subs for bbos, are as strong as the previous quarter maybe not that bad.

[BBhombre]

If new Z10 buyers no longer use BIS, do you think they will be excluded from the subscriber figure?