1. cherolis's Avatar
    RIMM Selloff: Justified? in [Market-Ticker]

    Read this article for some real perspective on the sell off this morning. This is a very widely read blog and it will have an impact. Rim improved both cash and margins this quarter. That news is huge and should have cause a massive buy in... not a sell off. People do not read precisely, and they often don't listen well either. Heinz clearly stated the subscriber fee system had already been altered. So.. the change everyone is afraid of has already happened... and margins and cash increased.

    That means the company is kicking *** people. I never would've believed it would be possible for RIM to improve both cash and margins before the launch... but they have.
    12-21-12 10:49 AM
  2. ADGrant's Avatar
    RIMM Selloff: Justified? in [Market-Ticker]

    Read this article for some real perspective on the sell off this morning. This is a very widely read blog and it will have an impact. Rim improved both cash and margins this quarter. That news is huge and should have cause a massive buy in... not a sell off. People do not read precisely, and they often don't listen well either. Heinz clearly stated the subscriber fee system had already been altered. So.. the change everyone is afraid of has already happened... and margins and cash increased.

    That means the company is kicking *** people. I never would've believed it would be possible for RIM to improve both cash and margins before the launch... but they have.
    The change has not already happened. It happens with the BB 10 launch.
    12-21-12 11:24 AM
  3. MisterMe11's Avatar
    Interesting. I think that margins went up at least in part because hardware revenue is declining faster than service revenue. That aspect is natural because BB7 sales are declining, but those who have already bought a pre BB10 phone will continue to use it for 1-3 years (I don't know the typical upgrade cycle, but something like that) - so will continue to generate service revenue.

    The big question is what happens to service revenue with BB10 devices. The BB7 (and earlier) service revenue should continue to fall off more slowly than the associated new BB7 hardware revenue because the older BBs in service have some remaining service life.
    12-21-12 11:26 AM
  4. Section ThirtyOne's Avatar
    Interesting article, and if the points he makes are factual and correct... then the selloff is definitely unjustified.

    Stock is down almost 21% as of this writing though.
    12-21-12 11:29 AM
  5. jfguay2's Avatar
    I read the transcript of this morning's interview on CNBC, and it was not touched on, as opposed to what the author of the blog mentions... a bit misleading, no?
    12-21-12 11:33 AM
  6. kdna's Avatar
    The competition is threatened and they are getting really nasty with their tactics. I've seen this kind of corporate behaviour before.
    12-21-12 11:45 AM
  7. ADGrant's Avatar
    Interesting. I think that margins went up at least in part because hardware revenue is declining faster than service revenue. That aspect is natural because BB7 sales are declining, but those who have already bought a pre BB10 phone will continue to use it for 1-3 years (I don't know the typical upgrade cycle, but something like that) - so will continue to generate service revenue.

    The big question is what happens to service revenue with BB10 devices. The BB7 (and earlier) service revenue should continue to fall off more slowly than the associated new BB7 hardware revenue because the older BBs in service have some remaining service life.
    In the US the consumer upgrade cycle is about 18 months to 2 years (based on carriers upgrade policies). It seems likely that a large portion of the US BIS revenue is likely to disappear during 2013. Canada has longer upgrade cycles though.
    12-21-12 12:19 PM
  8. MisterMe11's Avatar
    They also have BIS service revenue in emerging markets, right? I think that's where the current BIS compression service makes the most sense because it is mostly text-based traffic on older network technology (versus multimedia on faster networks being already compressed and not seeing a benefit from RIM's compression). There was a patent quoted on the forum in the past day which suggests RIM could transcode video down to lower data rates for older devices/networks, but we don't know if and when they'll offer this capability.

    In the US the consumer upgrade cycle is about 18 months to 2 years (based on carriers upgrade policies). It seems likely that a large portion of the US BIS revenue is likely to disappear during 2013. Canada has longer upgrade cycles though.
    12-21-12 01:23 PM
  9. ADGrant's Avatar
    They also have BIS service revenue in emerging markets, right? I think that's where the current BIS compression service makes the most sense because it is mostly text-based traffic on older network technology (versus multimedia on faster networks being already compressed and not seeing a benefit from RIM's compression). There was a patent quoted on the forum in the past day which suggests RIM could transcode video down to lower data rates for older devices/networks, but we don't know if and when they'll offer this capability.
    They do but there Re a couple of problems. Firstly the service fees need to be lower as BB 7 is no longer a premium device and the emerging markets have less money. Secondly emerging market growth of BIS has begun to stall in many emerging markets (thou there are others where it is doing great).
    12-21-12 01:44 PM
  10. Roo Zilla's Avatar
    Whoever wrote the article doesn't know the first thing about manufacturing. He says:

    "That was one of the biggest shockers to me in the report: Margins increased.

    How's that possible, when the product mix does not have any of the new phones in it as of yet, and the subscriber count went down?"

    It's possible, because over time, component prices drop. Lee Jun's Xiaomi counts on this phenomenon to make a profit. When Xiaomi launches their phones, they price them under cost, the sell for about $320 when cost is closer to $370. During the course of a year, prices drop sufficiently for them to make a profit. This is nothing new, and it's how also how Apple can sell the iPhone 4 in 2013 for $450 and still maintain it's high margins on that device. It probably costs significantly less than the $210 they were paying than 2 years ago when it launched.
    12-21-12 02:15 PM
  11. mrfreetruth's Avatar
    RIM (RIMM) Service Revenue Will Decline, Not Disappear Stresses Goldman

    Shares of RIM (NASDAQ: RIMM) declined this morning on fears related to changes in its service revenue model for BB10. Goldman Sachs believes the decline is a result of "misunderstanding". Analysts expect it to decline, not disappear.

    "Importantly, we believe there may be a misunderstanding that as a result of the move to BB10, all of RIM's services revenues are at risk. Rather, we believe its current installed base will not be affected by the different BB10 pricing structure, though it will continue to be impacted by competition," said analyst Simona Jankowski.

    New consumers who purchase a BB10 device are not likely to pay a service fee, but importantly, existing customer will. New enterprise subscribers would probably pay some level of service fee, though plans will be tiered and APRU could declined. New BB7 subscriber will pay service fees, noted the analyst report.

    A second point worth noting is increased carrier support for BB10, seen by some on Wall Street as a trade-off for lower service fees.

    "Importantly, RIM noted that BB10 is now in technical acceptance programs with over 150 carriers, up from 50 carriers about three months ago," said Jankowski.

    Jankowski thinks there is a 30 percent probability of a "bull case" for Research In Motion. In this scenario, RIM stock would be worth $30 per share.

    Goldman Sachs has a Buy rating on RIM with a modified price target of $17.00 (from $16.00).
    12-21-12 02:28 PM
  12. mrfreetruth's Avatar
    ALL TODAYS/ DEC 21/2012
    Nice to see other are increasing their targets on RIM .


    TD $13 FROM $12.00

    BMO $12 FROM $ 8.00

    SCOTIA $18.60 FROM $16.80

    PARAGDIGM RESEARCH $ 14.50 FROME $14.00
    12-21-12 02:33 PM
  13. anon(3310921)'s Avatar
    Accuracy of the article aside. . .I still think the market has a bunch of arbitrary time constraints on the success of RIM. . .RIM has proven to be remarkably resilient in this transition and I'm under the impression that RIM has made it through the hard part of this quite well. . .the point is RIM's service revenue structure will change but the effect won't happen over night . . .and by the time the change has any really significant impact, RIM will already have the potential for other streams of income (more robust service offerings in BES 10, hardware that can actually be profitable again etc. . .)
    spike12, Joy1980 and KiLuMaNaTi like this.
    12-21-12 03:21 PM
  14. Dapper37's Avatar
    The change has not already happened. It happens with the BB 10 launch.
    Teared plans have been the norm in South East Asia for years now. RIM has experience with this model, they know what they're doing!
    12-22-12 09:44 PM

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