1. Dabrador's Avatar
    From the Wall Street Journal:


    Is smartphone pioneer BlackBerry in danger of becoming the AOL of the mobile-device market?

    Perhaps. Verizon Wireless's launch Friday of the Droid phone, a Motorola-built handset using Google's Android operating system, signals the opening of a new front in the smartphone war. Early buzz on the Droid suggests it may be the strongest competitor to Apple's iPhone so far. But it is BlackBerry maker Research In Motion, more than Apple, which is particularly vulnerable.

    BlackBerry has failed to build on the popularity of its email service with a robust Internet browser. That wasn't a major issue while the iPhone, only available on AT&T, was the only other game in town. But now the array of competitive smartphones includes the Palm Pre on Sprint as well as the Droid.

    Apple is already closing the market share gap with RIM, boosting its global smartphone share to 17% in the third quarter, estimates Strategy Analytics, while RIM rose to 19.5%. For 2008, RIM was at 15.6% and Apple at 9.1%. RIM could see some defections in coming months. Consumers now represent the majority of new subscribers. But the percentage claiming to be very satisfied with their BlackBerry declined five points to 43% between June and September, according to research firm ChangeWave. Its research also showed erosion among corporate information-technology departments, historically RIM's sweet spot. Apple has made inroads among corporate purchasers although it far lags RIM.

    Of course, RIM could still reinvent the BlackBerry and recapture momentum. Even if it does, though, it may find it difficult to maintain profit margins. Consider: RIM's gross margin dropped to 44% in the latest quarter from 56% three years ago, despite little change in the average selling price of its devices. That's partly because the more complex devices coming onto the market are more costly to make.

    Devices are not likely to become simpler. Yet prices are likely to come under pressure as competition intensifies. RIM could also face a squeeze on the fee it charges carriers for each subscriber, which helps keep RIM's gross margin above the roughly 31% recently reported by rivals like Nokia and HTC.

    All that suggests RIM's gross margin will continue declining. What's more, as Deutsche Bank analyst Brian Modoff says, RIM will likely have to boost spending on research and development and marketing if it is to maintain its market share. The combined impact would be weak profit growth even if sales boomed. Citigroup analyst Jim Suva estimates RIM's operating margin will drop to 19.2% in fiscal 2011 from 23.1% last quarter, excluding litigation expense. That would slow EPS growth to just 1.7% in fiscal 2011 from this year, assuming 18% sales growth.

    In the wake of a recent sell-off, RIM is trading at 14.3 times consensus 2010 earnings. That appears cheap relative to stocks like Apple. But given the potential for slow earnings growth, it may be still pricey.
    11-04-09 03:11 PM
  2. Radius's Avatar
    This has been posted before, probably more than once. Thanks though.
    11-04-09 03:14 PM
  3. berryite's Avatar
    From the Wall Street Journal: Is smartphone pioneer BlackBerry in danger of becoming the AOL of the mobile-device market?
    And Forbes Magazine recently wrote an article predicting that RIM would ultimately kick Apple and win the SmartPhone wars.

    I'm happy to see Motorola back in the game. But the SmartPhone segment of the market is fragmenting into subsections. There is really no way Apple or Morotola or HTC would get me away from RIM/BlackBerry based on the products they have on the market today. Yes Apple has gotten a lot of kids to buy their iToy but serious data people aren't impressed and aren't going to make a transition to a device that is all glitter and no guts.
    11-04-09 03:28 PM