02-18-09 02:14 PM
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  1. backdown00's Avatar
    Overhead and labor costs? Overhead is never included in the cost price of a product...labor costs...yes....but being how most of them are produced in Mexico...cant see it costing over $150 a storm!!!

    Im telling you....this is coming from someone who works at RIM....the cost of the storm is $20 to $30....i dont know if labor is included or not...but I will ask him.

    Do you guys know why the STORM has such a nice audio output? Because, the engineers who worked on it.....one of them...is a big audiophile guy and didnt want to go cheap....he could of went with a $0.60 speaker but said no to his boss and went with a $3 speaker! True story!
    Are you serious? When a product has a cost rolled or set, Overhead is calculated into that standard as well as labor. That is a fully burdened standard. Buying above that cost would force an unfavorable savings or dis-savings.

    Example: if it takes 203$ to make a storm, that is what it is costed at, or its standard. If rim is to pay above that standard for reasons such as shortages, prices increases, expediting fee's that would result in a higher net loss on the sale of that product.

    If your saying it takes rim 20-30$ to make a storm, then the assumption would be they are paying 163-173$ in labor/overhead on the product to get to the 203$ mark.
    02-17-09 10:16 AM
  2. asmallchild's Avatar
    I dont know....I will talk to him again....but this is what he told me...you do realize that they buy everything in bulk by the millions and the price RIM gets is not the listed price. Those websites add up prices at retail price!

    I just cant see cost price of any BB being over $50...but I might be wrong.
    No worries, I could be wrong as well. I'm just quoting a random article
    02-17-09 10:23 AM
  3. backdown00's Avatar
    I dont know....I will talk to him again....but this is what he told me...you do realize that they buy everything in bulk by the millions and the price RIM gets is not the listed price. Those websites add up prices at retail price!

    I just cant see cost price of any BB being over $50...but I might be wrong.
    Hey rmanaudio, I do agree they will buy in bulk, but not by the millions. You know what the inventory liability would be to buying such large quantities? I am sure rim puts up blanket PO's for X amount of pieces over the course of a QTR based on what their demand plan is. They may be getting bulk pricing, but for it to cost 20$ to 30$ to produce a storm seems a little off.
    02-17-09 10:34 AM
  4. kuroshio's Avatar
    Doesn't VZW pay/subsidize RIM for the lower VZW sell price as AT&T does Apple for the iphone? If so, RIM wouldn't be selling them at a loss to VZW.
    It's not about selling them at a loss to VZ. What people are saying happened with the Storm was the demand outstripped the supply RIM initially allocated, forcing RIM to pay extra production costs.

    RIM produced X amount of handsets in prep for the Storm launch. It cost them the normal production cost to make that amount. But as everyone knows from release day, VZ sold out out of their stock in many locations (some stores before they opened). VZ turned around and called RIM for more Storms. RIM had 2 choices:
    1. Tell VZ that they would receive their normal shipment amounts
    2. Increase production to meet the unexpected demand


    To do that, RIM had to demand more parts from their suppliers. Had to increase factory manhours for assembly. Increase shipping costs for drop shipping more handset to VZ. Verizon's price per handset is locked by their contract for RIM. They would not pay extra per handset for any extended manufacturing costs the same way RIM wouldn't reduce VZ's price per handset if they found a cheap surplus of parts. RIM eats the extra costs.
    02-17-09 11:16 AM
  5. infamyx's Avatar
    amazingly, this thread is what the last one should have been if people could actually think logically instead of asking for credentials every 2 posts -.-

    The Storm's "estimated" cost is like 204 or such, the demand for the product far exceeded supply, they amped up supply needed to put them out asap, i would figure that with the stated costs, maybe RIM was spending in the ballpark of 300ish per Storm, including shipping overnight to VZW, who is still paying whatever price they pay for the phone (im not going to say at unsubsidized prices but its still probably around 400) and roll it out to you at 199.99 for a two year contract.

    They lost money on hardware as soon as it released, which is honestly pretty standard. Someone pulled the Gaming Console Market as a example of losing on hardware to make it up in software, for RIMs case that will continued subscriptions to their BES BIS and when the app store drops. Its outlook on its next financial quarter is looking upwards as well.
    02-17-09 12:31 PM
  6. asmallchild's Avatar
    amazingly, this thread is what the last one should have been if people could actually think logically instead of asking for credentials every 2 posts -.-

    The Storm's "estimated" cost is like 204 or such, the demand for the product far exceeded supply, they amped up supply needed to put them out asap, i would figure that with the stated costs, maybe RIM was spending in the ballpark of 300ish per Storm, including shipping overnight to VZW, who is still paying whatever price they pay for the phone (im not going to say at unsubsidized prices but its still probably around 400) and roll it out to you at 199.99 for a two year contract.

    They lost money on hardware as soon as it released, which is honestly pretty standard. Someone pulled the Gaming Console Market as a example of losing on hardware to make it up in software, for RIMs case that will continued subscriptions to their BES BIS and when the app store drops. Its outlook on its next financial quarter is looking upwards as well.
    I hadn't realized it was prevalent with smartphones as well. I've definitely heard of this in the gaming console market.
    02-17-09 12:33 PM
  7. infamyx's Avatar
    You'd still look to turn a profit on a phone, the margin of profit gets higher as costs drop later on. If RIM is making the Storm at 204...they have to be selling it for higher to VZW, who will then push the phones price down thru subsidizing and a 2 year contract (thats how they recoup their money)

    The Storm, or even the Iphone had a pretty big reception, but it sold out quick. You can either
    1. Tell people to **** off, your making X amount per week regardless of sales
    2. Ramp up production, get the phone to the people for deeper market penetration and recoup costs in software (hi apple)
    02-17-09 12:40 PM
  8. bigman2's Avatar
    I'm sure the increase in production costs to meet higher than expect deman of the Storm is a factor. I'm not sure that's the sole cause.
    And if I hadn't been posting so bloody early in the morning earlier, I might have thought to include this above. So fortunately there was someone to pick up the slack as it were.

    RIM likely entered into fairly long term contracts with the various suppliers of Storm parts... A set, STABLE, rate for a set number of parts coming in at a agreed upon schedule. Then demand ends up being much higher than RIM anticipated, so they have to pay a nice premium to get their suppliers to go above and beyond their contract obligations.

    Just as a bit of a side rant... It's exactly for these sorts of reasons why you have to take all those gen ed classes in college. Things that have absolutely nothing to do with your degree. A simple overview class in POM (Production and Operations Management) would help clarify a lot of these issues for people.
    02-17-09 01:37 PM
  9. rmanaudio's Avatar
    I do think they do buy a million at a time for each production factory (Mexico and Canada) and I have got confirmation that cost price for material only is around $28. This is material only...no labour or overhead! He did not know how much out the door cost price is...just materials as he has seen the material price sheet for the storm.
    02-17-09 02:33 PM
  10. cereal killer's Avatar
    No offense to anybody in here. But nobody in here, including myself, has the credentials to be deciding what RIMS numbers mean.

    This whole thread is nothing but pure speculation. We can speculate all day long............

    With that said. Why dont we go with what the PROFESSIONALS who do this for a living say? I think they have a much better understanding of whats going on than all of us combined.

    I'm going to copy and paste directly from the article so that whoever has not read the actual article will get a much clearer picture of whats really going on. I'm going to link the article as well so that I don't get accused of trolling and/or inflaming people. Hopefully no arguing will ensue.

    Thanks.

    The rising BlackBerry subscriber numbers and falling profits suggest a mixed shift in RIM products, according to UBS analyst Maynard Um. People signing on to BlackBerry's email service with the purchase of the Storm seem to be returning the phone and opting for other BlackBerries like the Curve.

    But the real shocker is that despite adding as many as 3.5 million new subscribers -- 20% more than expected in the quarter -- gross margins would narrow to 40%.

    In less than six months, RIM's gross margins have slimmed from 50.7% to well below the mid-40% range the company had been expecting. Thinner margins on steady sales means costs are rising, and in RIM's case, the costs are rising faster than the company predicted.

    To keep supplies up with demand, RIM has had to strike deals with its manufacturing partners to insure quicker production. These high-priority requests are also higher-cost, according to one Wall Street analyst who is familiar with the production push. RIM has also had to pay for rush shipments of parts to keep production from slowing. These priority shipments also incur more costs, the analyst says.


    I think the most telling of whats going on with RIM is this statement.

    Fears that the warning Wednesday is a sign that RIM's once lucrative high-margin business user base is rapidly eroding as the company enters the consumer market helped send shares down 16% at midday.

    Here is the link to the actual article........it's an interesting read to say the least. Peace.

    Blackberry Storm Batters Research In Motion | Telecom | Financial Articles & Investing News | TheStreet.com
    02-17-09 02:38 PM
  11. cereal killer's Avatar
    I do think they do buy a million at a time for each production factory (Mexico and Canada) and I have got confirmation that cost price for material only is around $28. This is material only...no labour or overhead! He did not know how much out the door cost price is...just materials as he has seen the material price sheet for the storm.
    $28! Mexico's labor is what? I've read that at some plants the STARTING wage is $1.50/hour and thats in the automotive industry. This is getting pretty crazy if what you say is corrrect...........

    I guessed a while back that the cost to make the Storm was NO MORE than $100.00USD. It's buried somewhere on these boards.
    Last edited by cereal killer; 02-17-09 at 02:55 PM.
    02-17-09 02:51 PM
  12. infamyx's Avatar
    I'm sorry but I'm going to call shenanigans if it cost maybe 100 dollars total to make a storm and ship it, this thread wouldn't exist

    Posted from my CrackBerry at wapforums.crackberry.com
    02-17-09 03:12 PM
  13. K-redtbk's Avatar
    No offense to anybody in here. But nobody in here, including myself, has the credentials to be deciding what RIMS numbers mean.
    Yeah, it's not like you would find anyone who actually manages other peoples money for a living on a site for blackberry users.
    02-17-09 03:49 PM
  14. asmallchild's Avatar
    Yeah, it's not like you would find anyone who actually manages other peoples money for a living on a site for blackberry users.
    You mean, they use it for business?
    02-17-09 03:51 PM
  15. K-redtbk's Avatar
    You mean, they use it for business?
    hearsay

    Everyone gets a blackberry for the games and free apps that will make it fart.
    02-17-09 03:54 PM
  16. BzB's Avatar
    To keep supplies up with demand, RIM has had to strike deals with its manufacturing partners to insure quicker production. These high-priority requests are also higher-cost, according to one Wall Street analyst who is familiar with the production push. RIM has also had to pay for rush shipments of parts to keep production from slowing. These priority shipments also incur more costs, the analyst says.
    ...and from earlier in the day...

    because demand outstripped their forecasted target they were forced to use different parts suppliers, increase manufacturing (likely at overtime hours), and rush shipping to retailers which all resulted in a higher cost to produce than they originally expected thereby eroding their profit margin.

    isn't that simple.
    i'm not exactly sure what you're getting at, but your analyst is basically supporting the same thing i and a few others have already said.
    02-17-09 04:01 PM
  17. rmanaudio's Avatar
    $28! Mexico's labor is what? I've read that at some plants the STARTING wage is $1.50/hour and thats in the automotive industry. This is getting pretty crazy if what you say is corrrect...........

    I guessed a while back that the cost to make the Storm was NO MORE than $100.00USD. It's buried somewhere on these boards.
    Yes...$28 for the materials needed to make a STORM if you buy the materials in the bulk!!!

    Think about it...if the mainboard on the storm is the most expensive unit and it costs $35 a unit...if you wanted to buy 100 at a time...im sure its $30...and if you buy thousands at a time...im sure its around $20...now picture buying a million at a time...its not going to cost more than $20!!!! What is left to make the storm??? Case...glass...speaker, etc....no more than $10 when you buy bulk of a million at a time....so why is in impossible to have a cost price of $28 a storm (Materials only)???!?!?!?!?
    02-17-09 04:10 PM
  18. cereal killer's Avatar
    ...and from earlier in the day...



    i'm not exactly sure what you're getting at, but your analyst is basically supporting the same thing i and a few others have already said.
    I posted that for the others who may have not read the article.

    The only thing that is of real value happens to be the most troubling thing to that article. The fact that there was an increase in subscriptions (3.5M) and decrease in margins. Thats not a small thing : ) and it obviously sent a shock wave because investors ran for the hills.

    Why did this happen?

    again copy and paste. Not my words ; )

    The rising BlackBerry subscriber numbers and falling profits suggest a mixed shift in RIM products, according to UBS analyst Maynard Um. People signing on to BlackBerry's email service with the purchase of the Storm seem to be returning the phone and opting for other BlackBerries like the Curve.
    02-17-09 04:22 PM
  19. cereal killer's Avatar
    Yes...$28 for the materials needed to make a STORM if you buy the materials in the bulk!!!

    Think about it...if the mainboard on the storm is the most expensive unit and it costs $35 a unit...if you wanted to buy 100 at a time...im sure its $30...and if you buy thousands at a time...im sure its around $20...now picture buying a million at a time...its not going to cost more than $20!!!! What is left to make the storm??? Case...glass...speaker, etc....no more than $10 when you buy bulk of a million at a time....so why is in impossible to have a cost price of $28 a storm (Materials only)???!?!?!?!?
    no arguement with that : )
    02-17-09 04:25 PM
  20. asmallchild's Avatar
    02-17-09 04:42 PM
  21. infamyx's Avatar
    If there were a million of each part just lying around, im almost sure some people wouldn't have had to wait until Jan. to get their storm.

    Again this article is SPECULATION on what he thinks is the cause of RIMs smaller profit margin, words like suggest and seems dont make them concrete, this is what he believes to be the cause, if its FACTUAL is up for debate. The only people who can attest to that is 1. RIM or 2. Verizon
    02-17-09 05:15 PM
  22. BzB's Avatar
    The rising BlackBerry subscriber numbers and falling profits suggest a mixed shift in RIM products, according to UBS analyst Maynard Um. People signing on to BlackBerry's email service with the purchase of the Storm seem to be returning the phone and opting for other BlackBerries like the Curve.
    you have to take that with a mountain of salt as they have no reliable numbers or statistics to support how many storms have been returned or if it is excessive in comparison to other new to the market devices or if they're returning it for another storm because of hardware concerns. i've said time and time again that the storm is a tough device to pick up for fist time bb users, and in addition (some of my storm bretheren may not like this) but i just couldn't recommend the storm to a bb newbie or a hard core emailer (...or those directly comparing it to an iphone) when the only official os is .75.

    that said, even in light of the returns the other thing that is actually good news for rim is that the people who do return still opt to stay in the rim family.
    02-17-09 05:19 PM
  23. bigman2's Avatar
    i've said time and time again that the storm is a tough device to pick up for fist time bb users, and in addition (some of my storm bretheren may not like this) but i just couldn't recommend the storm to a bb newbie or a hard core emailer (...or those directly comparing it to an iphone) when the only official os is .75.
    Don't want to get too off topic, but I would think the Storm would be easier for new BB users to pick up as opposed to the other way around. There are no preconceptions about how things are "supposed" to work. They can be taught much easier than someone who's been using BBs for years and has all these habits that need to be unlearned when something like the Storm radically changes them.

    And to bring this a bit back on topic, we don't have specific numbers, but VZW has gone on record saying that the Storm is/was their least returned smartphone. Not sure if that's still the case or not, but stronger than expected sales + low return rates is generally what you would call a good thing.
    02-17-09 05:42 PM
  24. infamyx's Avatar
    it really depends on what the return rates are on other phones but if lets say their 2nd best PDA/smartphone has a 5% return rate and the storm is 4% thats really not that good
    02-17-09 05:48 PM
  25. cereal killer's Avatar

    that said, even in light of the returns the other thing that is actually good news for rim is that the people who do return still opt to stay in the rim family.
    I concur Busy Bee. Hey look at that we agree on something. Whadda ya know : )

    Can we hug now?
    02-17-09 06:44 PM
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