1. SmallBizMaster's Avatar
    So i spent a good deal of time looking at RIM as an investment and documented my research with lessons that can be learned for small business. Heads up, it is long but covers financials, market and technical aspects of RIM. Cover playbook aspects.

    post can be found here:

    The Koz (Business Coach)

    email me if you have any questions.

    The Koz
    Business Consultant | Coach | Business Planning | Business Financing
    rjedge54 likes this.
    02-13-12 05:41 PM
  2. WIdo's Avatar
    Thank you for this detailed analysis! That's really interesting. I came to a similar conclusion in a less exhaustive way. And I recently did the same thing...
    02-13-12 07:13 PM
  3. palmless's Avatar
    Very interesting!

    What do you think of this guy's analysis:

    These Single-Digit P/Es Are Value Traps - DailyFinance "Caveat emptor RIM shareholders, it looks like more of the same is on its way."

    By the way, Apple cash on hand should be closer to $100M than $30M.
    Last edited by Palmless; 02-13-12 at 08:23 PM.
    02-13-12 08:07 PM
  4. ADozenEggs@aol.com's Avatar
    So i spent a good deal of time looking at RIM as an investment and documented my research with lessons that can be learned for small business. Heads up, it is long but covers financials, market and technical aspects of RIM. Cover playbook aspects.

    post can be found here:

    The Koz (Business Coach)

    email me if you have any questions.

    The Koz
    Business Consultant | Coach | Business Planning | Business Financing
    Interesting blog. . Some concerns I would voice are with regards to some of the assumptions. Also, while the PB might be priced at $199 I don't believe that R.I.M feels that's the actual "value" of the product.

    So, while its been selling well(I assume) at the devalued priced, if they launch a new PB, 4g let's say, and can't keep the build price low, then your profit margins become extremely slim. At least for this product.

    Also consider that many of the U.S. enterprise users don't actually "buy" the phones. They "lease" them. At least they did when I was at Morgan Stanley and OppenheimerFunds. So the 75mm subscribers don't necessarily equate to 75mm phones "sold".

    So you have to be careful when adding that portion of potential revenue to the mix.

    Good luck with the consulting. I wish you well with your business.
    Last edited by ADozenEggs@aol.com; 02-14-12 at 12:43 AM. Reason: Typo
    02-13-12 09:38 PM
  5. manutdx's Avatar
    wow.

    No offense but that was a huge waste if time. Your business analysis was fairly weak (was all your info Googled or off Wikipedia?)

    sorry, but it didnt come across as professional at all and your website is very poor. Plus you actually recommend buying RIMM stocks at the end which goes against every major investment firm's recommendations right now.

    well, good luck to you though. I think you're going to need it.
    02-13-12 11:46 PM
  6. slalom's Avatar
    I didn't read the whole thing, but I did buy some "Ageless Male" from the sidebar ad, so hopefully it works for me.

    Nice first post.

    ....not to poke too much fun, but "smallbizmaster"....with a few more months like the past few, RIM is headed towards your target market!
    Last edited by Slalom; 02-14-12 at 12:01 AM.
    02-13-12 11:58 PM
  7. FSeverino's Avatar
    So... buy?

    Ive been 'feeling' a buy... but ive never done any before
    02-14-12 12:13 AM
  8. VerryBestr's Avatar
    ... Also consider that many of the U.S. enterprise users don't actually "buy" the phones. They "lease" them. At least they did when I was at Morgan Stanley and OppenheimerFunds. So the 75mm subscribers don't necessarily equate to 75mm phones "sold". ...
    Interesting point. But I haven't picked up any indication of that practice from RIM's financial reports. I'll have to look again.

    Are you sure that these phones were leased directly from RIM? Or is it possible that they were leased from an intermediary (carriers, value added resellers, etc.), so that they actually represented sales for RIM?

    I was under the impression that RIM doesn't directly sell phones to end users, even if the end users are large corporations.
    02-14-12 06:48 AM
  9. ADozenEggs@aol.com's Avatar
    Interesting point. But I haven't picked up any indication of that practice from RIM's financial reports. I'll have to look again.

    Are you sure that these phones were leased directly from RIM? Or is it possible that they were leased from an intermediary (carriers, value added resellers, etc.), so that they actually represented sales for RIM?

    I was under the impression that RIM doesn't directly sell phones to end users, even if the end users are large corporations.
    They're leased through communications equipment leasing and authorized distributors from what I recall. Same thing with copiers, printers, desktops, laptops and those old school IBM/Lenovo black laptops I all used to lugged around in my former life.

    I don't see how even authorized distributors would be purchasing these devices either. The turn around is 2 - 3 years.

    If some entity is actually purchasing these phones at anything other than a steep large volume discount, then someone is loosing a sh*t load of money.
    02-14-12 11:52 AM
  10. alnamvet68's Avatar
    Nice blog, but shouldn't this be in the General forum?
    02-14-12 12:06 PM
  11. Scotter75's Avatar
    First off. Note the spelling of ANALysts. Next, The number of ANALysts who did any prediction of the 2008 recession you can count on one hand. Almost all ANALysts recycle news from someone else. Very few do their own work.
    If you remember the big Enron Financial scandal from about 10 years ago, it ran on for several years. Only one ANALysts (worked with Merrill Lynch) raised questions about what was really going on. The next day after it was published, Enron forced Merrill Lynch to fire him.
    RIM has a future. Their products are in most automobiles, Power Plants, Medical Fields, Security, they own QNX. Not just cell phones and The FANTASTIC PLAYBOOK. PB users are not lemmings.
    02-14-12 12:22 PM
  12. erodenero's Avatar
    So... buy?

    Ive been 'feeling' a buy... but ive never done any before
    i bought at 16.35 and again at 16.80, with the way its been going the past couple days, you should probably wait til it atleast balances out if you are going to buy. Dont expect any miracles in the short term, im thinking of this as more of a long term thing, i guess we'll see by the end of 2012.
    02-14-12 12:28 PM
  13. Matthew Russell's Avatar
    Idk when you wrote this thing, but it's saying the most recent revenue figure you've got is the $20 billion February 2011. A lot has changed, my friend. I don't know if you have access to capital IQ, but I recommend it, cuz it's more current than whatever you're using (i guess the company's stored web site results, or something).

    Anyway, for the LTM year ending Dec 2012, their revenue was $12.6 billion. Sounds bad right? well, they had operating income of $4.2 billion, and declared a loss of ($869) mil, or ($1.67) diluted EPS per share. Also sounds bad. It is bad, actually. However, included in the loss was a goodwill writedown of $690 million, they had a fairly unique restructuring charge of $333 million, so if you add those back, you're back in the black a little bit (but not enough to impress anyone). There's hope though. Their cash and equiv balance increased from $1.7 to 2.7 billion from 2011 to 2012, which suggests they are not burning cash to cover losses, and have been chugging along with modest means, but sufficient to keep them going without any debt or government life support...

    Here's an analysis of my own, focused mostly on sales, expenses, and earnings:
    To anyone reading this, I'm not claiming my assumptions are fact, so tinker with them as you like to decide whether you think rim will die, thrive, or coast on life support. Anyway, here's my take:

    approx. 1.7 billion phones were sold in 2012 (source: gartner research; technically it was 419 million in 2Q2012, so I've multiplied that by 4, but the report also says that only 1/4 mobile phones sold was a smartphone, so back down to a smartphone market of 419/yr). There are roughly 79 million bberry users. Operating (or contribution) margin was 31% for older products (as evidenced from RIM's 2012 income statement), but it was 46% back when they were popular (2006-7ish), so it is probably at least 40% for the new BBs. Operating expenses were $4.2 billion for 2012 (4.6 billion in 2011), but they will likely increase this year due to bolstered marketing efforts (so we’ll say $5 billion this year to allow a lot of room for error). A BB10 Z10 sells for $600ish (not sure bout the Q10 granted), so assuming 40% margin, that’s $240 per phone. Their gross profit last year was $3.9 billion, but let’s be really pessimistic and say profit from incumbent products will drop by half this year (a drop which is unlikely, maybe 30 or 40% is more realistic, but I'll go with 50% to be conservative); that will get them just under $2 billion, so another $3 billion in margin would be needed from the BB10 to break even. Under these really conservative assumptions, that means 12.5 million BB10 sales are needed for breakeven over the next year. If 1/15 current bberry users upgrade, there’s 5 million sales right there. If global smartphone sales reach 420 million again this year (and they will probably be more since the proportion of smartphones being purchased vs regular phones is rising), and BB10 captures just 2% of those sales on top of their 5 million sales from incumbents, that’s 8.4 million more sales, totalling 13.4 million sales, ie so that would put them well into the black. With the media hype they have going and the positive reviews, landing a fresh 2% of all smartphone sales over the next year is very reasonable, considering there are only 3 or 4 competitors to worry about. If you don’t trust my numbers, go check them out from RIM’s financial statements, or get them from capital IQ. I’ve used some pessimistic cost assumptions ($5 billion in expenses seems high, and margin is probably closer to 45%, if not higher, and a no smartphone industry unit sales growth assumption, which is unlikely, it should grow from 420 to something higher).

    Bbry don’t need 30% market share to be considered a success, investors would be happy with BBRY's profits if BB10 can capture even 4%ish of global smartphone sales (though obviously more needed in Canada, UK, and USA since that's where they actually are). I figure those sales would come from 4% fresh sales of an assumed global market size of 420 million smart phone units sold for the year (ie 16.7 million units), and a 1/15th upgrade rate of their 79 million base users (ie 5.3 million units, so 22 million units sold total). Put another way, that is 1 in every 20 smart phones sold in the world for the coming year is a BB10, but they can get to a similar sales figure with a smaller ratio if global 2013 smart phone unit sales grow, which they should). Here is a recap of my very pessimistic assumptions before giving what this all comes to in earnings results:
    - $5 billion in expenses.
    - 40% BB10 margin with sales price of $600 = $240 contribution margin per BB10.
    - 2013 incumbent (or old) product sales and implicitly contribution margin drops by 50%, so down to $1.95 billion from $3.9 billion last year.
    - ~22 million BB10 sales for the upcoming year (based on 5.3% of a 420 million unit global smart phone market for the upcoming year).

    22 mil BB10 sales x $240 per unit profit margin + $1.95 billion of margin from old products - $5 billion of expenses
    = pre-tax net income of $2.23 billion, or $4.28 per share.

    They have tax assets from last year's losses, but ignoring those, the corp tax rate is 23.5% (includes federal and provincial), so that would mean Net Income of $1.7 billion, or $3.28 per share. Using a fairly conservative 10x trailing P/E ratio, that would justify a share price of $33, but you can bet your *** that if BBRY makes EPS of $3.28 for the year, their share price will be a lot higher than that in anticipation of even further growth. GOOG is selling at 24x earnings right now, which is ********, IMO.

    I'm not saying this WILL happen though. From summing quarterly unit sales reports, I've gathered that bbry shipped ~33 million BB units in 2012 (didn't bother to calculate playbooks). The earnings figure I calculated basically assumes those sales drop in half, and also that 22 million BB10s get sold (ie RIM sells a total of 38.5 million blackberries of all kinds in 2013). Now, 22 million BB10 sales is probably ambitious, so if I drop that to 16 million sales, but still hammer them with the same pessimistic assumptions that I've made, then they get about $1.20 EPS after tax (or $630 million profit). I've been really pessimistic with the cost and margin assumptions, so if BBRY does manage to get even 16 million BB10 sales for the upcoming year, I'm pretty sure that EPS will be higher than the $1.20 that I calculated, and that investors will be happy with those results. Just my take.

    Disclosure: I'm long BB and holding to the moon or to the grave.
    BigAl_BB9900 likes this.
    02-08-13 06:55 PM
  14. Matthew Russell's Avatar
    i bought at 16.35 and again at 16.80, with the way its been going the past couple days, you should probably wait til it atleast balances out if you are going to buy. Dont expect any miracles in the short term, im thinking of this as more of a long term thing, i guess we'll see by the end of 2012.
    I guess this turned out badly for you lol. I got burned a little too just recently from bad trading, but nothing like what mush have happened to you. anyway, i think it's a buy again, see below. I didn't check the dates on these posts.
    02-08-13 07:16 PM
  15. PatrickMJS's Avatar
    Interesting post. Good effort. Not sure a lot of your math makes sense but it's as good as many of the professional analyst's reports I've read.

    I have a hunch BB will sell a shed-load of BB10 phones (& tablets) this year and it will mark the beginning of their comeback. I picked up my Z10 on the 5th and have been massively impressed with it, and proudly showing it off to everyone I bump into. Each person is curious to see it, and quite a few have expressed interest in getting one, especially frustrated Android owners. Seems like the iPhone owners I've tried to show it to, don't want to look at it, or else they say something negative. But oh well, this year will be BB's make it or break it year, no question.
    02-09-13 10:01 AM
  16. Rickster1's Avatar
    Just a quick comment about sales and margins. BB has sales in non BB10 markets that are probably going to be decent but they are selling those units i.e. BB7 at zero to negative margins. IF, they were to sell approx. 10 million BB10 handsets, I think they will still do pretty good but that will have to be at 35%+ margin. Hard to know if the carriers are subsidizing the Z10 or if RIM is giving them incentives to push it. Example would be Telus. Now selling at $139 to match Rogers with a $50 trade in and $50 credit in some cases. That means they are selling the Z10 @ $39!!! As well, the writedowns BB took on the playbook are able to be recaptured upon sales of the PB which means they may be able to recapture approx. 25% of the inventory writedown they took on PB. Not a biggee but it may help boost revene a bit during this period of changeover. I would also assume they have lost global users and may be down to 70 million users globally. This will be subject to new Z10 sales in some markets. The jury is still out on sales and I think they have been OK so far. India coming on stream will hopefully help as well as other global markets before the US kicks in. Just my two cents for you to consider. Cheers!
    02-09-13 01:54 PM
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