[Dapper37]

The problem is that there is no place for data compression in the first world --- we, the consumers, all want to see the full internet, all the youtube videos... You can't compress a youtube video further --- it has already been compressed using the most efficient codec on earth.

There's will always be room for cost savings. Data compression is cost savings.

[Chris Umiastowski]

Hi everyone,

Kevin emailed me about this thread so I thought I'd come over and contribute. Thanks for starting it, to the original poster.

The Service Revenues
I had a long chat with a few folks yesterday (Friday, day after earnings), and we went through our own historical knowledge on the numbers. We are guessing as best we can on the BES / BIS split (dollars and percentage of consumer vs enterprise split). Given the decline in the US market I have to wonder if BES is possibly as low as 10%? I'm not sure. There is no good way to solve this algebraically. There's not enough disclosure.

But for the sake of argument, let's go with 60% service revenue being BIS, the other 40% being from BES. That's about what most people are calculating with their various estimates, and I think it's a good ballpark for discussion.

Is BIS going away?
If we keep saying BIS is going away, we will confuse people who don't really understand it. It's just a label. BIS is a set of services. RIM gets paid for these services through the carrier, and in some markets, BlackBerry plans (BIS plans) still have an extra tax, so the consumer is aware. But in most markets, the tax is hidden in the cost of the data bill, and it's the carrier paying the tax. The consumer sees no difference in pricing.

BIS is not going away. Just the fees associated with it are going away, in some cases. I don't know what RIM is going to structure, but I do not believe the market will pay for BBM, Facebook, Twitter, and the improvement in efficiency on full-rate data plans. I DO BELIEVE the market is willing to pay a small fee to have differentiation of services available. For example, if a carrier wants to create a starter plan with only Facebook, Twitter, email (BIS-lite), and RIM is the only platform that can support these starter plans (i.e. differentiated by features being turned on or off NOT just bandwidth), then they could take a small fee.

Remember Apple has iCloud and all their iPhone-centric services. We know they aren't ultra-reliable yet but they do not get a fee from carriers for this. Why should RIM get a fee for BBM and Facebook (as someone suggested to me via Twitter)?

BES fees have room to grow - perhaps a lot.
RIM has lost market share in enterprise, and they could recapture some of that share. They could also gain market share in MDM by managing iOS / Android devices. I believe the BES model is shifting to a SaaS model with monthly fees being paid directly from the enterprise to RIM. The carrier won't be involved in this (my speculation). The data plan won't need to be anything special for BES / Mobile Fusion. The relationship will be enterprise to RIM direct. Clearly there is room for this to grow, and it could grow quite nicely over time. It's entirely possible for the growth in this to 100% offset (or more) the decline in BIS.

Near Term - what matters is hardware sales
Now that the market has responded to this "rude awakening" (that should have been obvious) of service fee risk, the fact of the matter is BB10 sales will be the big driver of revenue in the next few quarters. If RIM can transition a healthy percentage of its sales to a higher ASP device, and earn good margins, this drives EPS, and will drive the stock price.

The service fee issue is a longer term issue. It's not going to disappear overnight. It's probably a 2-year decline. So if RIM can show healthy momentum in replacing this via strong hardware sales and a rebuild of enterprise revenue (recurring), all will be OK.

The stock movement
People say it's being controlled by the shorts. That's not entirely true. What this really means is that the stock price is being driven by short term trading NOT fundamental buyers who are thinking about the long term performance of the business. Hedge funds will go long and go short depending on what they see happening, what they think the stock will do. When you get enough of these hedge fund buyers and sellers in the market, it becomes a huge speculative situation, with every trader trying to predict what other traders will do. Remember there is a buyer for every seller.

And no, when you see some analyst talking down the stock that does NOT mean his firm is secretly buying. That's not how the Sell Side makes money.

[BBThemes]

Hi everyone,

Best first CB forum post. ever. welcome to the forums

[randall2580]

The problem is that there is no place for data compression in the first world --- we, the consumers, all want to see the full internet, all the youtube videos... You can't compress a youtube video further --- it has already been compressed using the most efficient codec on earth.

I understood from old posts (maybe it's changed since) that it is the reason MLB and NHL did not support video/live games on BB devices. The compression gave them latency problems and folks were calling customer service inordinately for BB devices when it was first tried. They decided there was no good fix and left the service out of their 2011 and 2012 offerings.

[notfanboy]

Near Term - what matters is hardware sales
Now that the market has responded to this "rude awakening" (that should have been obvious) of service fee risk, the fact of the matter is BB10 sales will be the big driver of revenue in the next few quarters. If RIM can transition a healthy percentage of its sales to a higher ASP device, and earn good margins, this drives EPS, and will drive the stock price.

I can think of two other possible rude awakenings and the price is the most imminent one. This is one of two big unknowns right now - how does RIM strike a balance between attractive prices and margins? If they price Z10 similarly to the Apple and android flagship phones, which I can't believe they will do, the market will punish them big time. If they price it too low, the market may not like than answer either. I suspect that's what the cash reserve is slated for: subsidizing the phones heavily, offer trade up programs for at least 3 months.

What no one seems to be pointing out, here in the forums and in the analyst reports, is that BB10 devices will probably do squat for the emerging markets for whom price is the biggest factor.

[anon(4018671)]

I can appreciate why RIM communicated they were modifying the fee structure (they had to during the earnings call) but they clearly didn't want to until Jan 30th when they unveil the platform to the public. It isn't a perfect world and now investors are left with the decision to keep money on the table or leave it at risk based on partial information. January 30th can't come fast enough.

[MTL]

Not exactly. BIS is going away for BB10 devices as we may now it now (and is still operating "as-is" for BB5-7 devices).

Does it mean there will not be data compression for BB10?

[anon(3310921)]

. . . What no one seems to be pointing out, here in the forums and in the analyst reports, is that BB10 devices will probably do squat for the emerging markets for whom price is the biggest factor.

Agreed . . .in the short term emerging markets won't be very influential . . .but eventually smartphone penetration will surge in these markets (some believe it will do so on a scale much larger and much faster than whats been seen in developed markets so far . . .) If RIM can stay above water long enough I feel they are in a unique position to take advantage of this . . .maybe. . .lol

[samab]

I understood from old posts (maybe it's changed since) that it is the reason MLB and NHL did not support video/live games on BB devices. The compression gave them latency problems and folks were calling customer service inordinately for BB devices when it was first tried. They decided there was no good fix and left the service out of their 2011 and 2012 offerings.

You cannot compress an h.264 video further --- it is already compressed using the most efficient codec on earth. The only thing you can do is to stream a lower bitrate h.264 video.

The latency issue is the video file going through the blackberry infrastructures --- i.e. if you live in Buffalo in the US, your traffic gets redirected up to Waterloo in Canada and then come back down to the US (therefore longer latency) --- but it has nothing to do with compression. A 25 MB highlight video of a home run will still be a 25 MB video file regardless of whether it goes straight to your phone or it goes through a scenic route through the blackberry infrastructures.

[randall2580]

You cannot compress an h.264 video further --- it is already compressed using the most efficient codec on earth. The only thing you can do is to stream a lower bitrate h.264 video.

The latency issue is the video file going through the blackberry infrastructures --- i.e. if you live in Buffalo in the US, your traffic gets redirected up to Waterloo in Canada and then come back down to the US (therefore longer latency) --- but it has nothing to do with compression. A 25 MB highlight video of a home run will still be a 25 MB video file regardless of whether it goes straight to your phone or it goes through a scenic route through the blackberry infrastructures.

Thank you for that I have a better understanding now. I thought one caused the other I stand corrected.

However the point is not for a clip it's for watching live games. Anything that has to go through BB servers will have this latency problem. I really hope something can be done, I like having the games available on the phone, the chance to have the game running in the background while doing other things is great, means I can be mobile and still catch the important moments as they happen.

[W Hoa]

Is it not possible that three options could be available from RIM or rather the telcos?

One: Phone plan which includes data

Two: Phone plan which doesn't include data

Three: Phone plan from RIM offering a smorgasbord of limited data services, at different price points, to meet internet or social or communication needs. Or two of these options. Or all of them?

[samab]

Thank you for that I have a better understanding now. I thought one caused the other I stand corrected.

However the point is not for a clip it's for watching live games. Anything that has to go through BB servers will have this latency problem. I really hope something can be done, I like having the games available on the phone, the chance to have the game running in the background while doing other things is great, means I can be mobile and still catch the important moments as they happen.

That's why RIM's share price plunged 20% on Friday --- with BB10, you are connected directly to the internet and RIM can't charge any more service fees because every consumer wants the full internet and video experience.

[samab]

Phone plan from RIM offering a smorgasbord of limited data services, at different price points, to meet internet or social or communication needs.

Nobody in the first world (US, Canada, UK and the rest of Europe) wants this option. And Wall Street only care about RIM's smartphone market share in the first world.

[kevinnugent]

Is it not possible that three options could be available from RIM or rather the telcos?

One: Phone plan which includes data

Two: Phone plan which doesn't include data

Three: Phone plan from RIM offering a smorgasbord of limited data services, at different price points, to meet internet or social or communication needs. Or two of these options. Or all of them?

OK, so you're going to rely on the snotty nosed sales associate at Best Buy and others to be able to make sense of, and then explain all these different options and tiers?? No frickn way. They couldn't explain the Playbook for goodness sakes.

[timmy t]

What about all of the new services RIM will offer with the new phones? Won't some of them generate additional revenue to make up the difference?

[kevinnugent]

Like what? BBM Music? How's that working out now?

[samab]

Like what? BBM Music? How's that working out now?

Apple has stated that itunes music store breaks even --- even if BBM Music becomes as big as itunes music store, it would still be broken even.

[mrfreetruth]

I see the anti rim fanboys creating confusion when non exists. The service fees have been discussed at great lengths. Funny how its always the same people who poo poo everything rim. The question is why are they Here and are they vested interests in bashing rim?

[BBNation]

We use BES server for current bbs and will be buying fusion to manage all 3 platforms and then migrate everything over to BES10 when it's avilable. RIM is messing with enterprise customers by not having BES10 ready before or with BB10 lauch. Our company will migrate to bb10 and buy bb10 phone in first week but how do you manage them. The management of these devices is must before any organization makes any purchase, it's unclear at this point. RIM's solution is to buy fusion now and then bes10 after few months...bad idead

[fedakd]

BBNation: It is NOT unclear at this point. A simple perusal on Blackberry's website indicates that Mobile Fusion will support Blackberry 10, iOS, in addition to Android.
In addition to your point, RIM is amalgamating ALL of its services into BES 10 (designed to be a simple upgrade from users already on Mobile Fusion)

Contary to your initial beliefs, the world is not ending. (Sorry, just hate ignorance and individuals that whine without doing their respective homework)

Cheers!

[lnichols]

We use BES server for current bbs and will be buying fusion to manage all 3 platforms and then migrate everything over to BES10 when it's avilable. RIM is messing with enterprise customers by not having BES10 ready before or with BB10 lauch. Our company will migrate to bb10 and buy bb10 phone in first week but how do you manage them. The management of these devices is must before any organization makes any purchase, it's unclear at this point. RIM's solution is to buy fusion now and then bes10 after few months...bad idead

BES10 is supposed to release with BB10, but you will still need a BES5 server for older BB phones. In May 2013 BES10 is supposed to get an update to support both BB10 and BBOS on the same sever. Also the BES and Mobile Fusion software is free, RIM charges for the CALs, and of course you will need the Windows server and licensing from Microsoft. Once you buy the CAL (BBOS, Android/iOS, Playbook/BB10 are the different types) you have the CAL. Your CALs will move over to the upgraded server.