1. Superfly_FR's Avatar
    EDIT : sorry, wrong credit, should be Motley Fool and not S.A (if a mod can change this ... thanks !).

    Remember me one's paper, some weeks ago

    Why the Decline in RIM's Service Revenue Doesn't Matter - AAPL, GOOG, NOK, RIMM - Foolish Blogging Network
    At the end of December, Research In Motion (NASDAQ: RIMM) released its financial results for Q3 FY 2013; a dive by the company's share price shortly followed. It wasn't due to bad results; on the contrary, the results were simply amazing. The company beat estimates both on the top and bottom line. EPS came in at a 22 cent loss versus the 35 cent loss that the Street was expecting. More importantly, the company was able to increase its cash position by $600 million, ending up with $2.9 billion in cash at the end of the quarter.
    So, why the plunge? Well, it was due to remarks in the company’s conference call regarding its highly profitable service revenue. CEO Thorston Heins stated that RIM's service revenue may come under pressure in the coming months and that some of RIM's 80 million subscribers may generate no revenue at all. Even though details have yet to be made clear; analysts expect RIM's service revenue to decline anywhere from 30-64% over the next two years.
    Service Revenue has helped RIM weather the tough times it has been going through lately; Service Revenue has also been on the upswing the past couple of years unlike RIM's hardware line of business. This quarter this highly profitable source of revenue made up 36% of RIM's Total Revenue; that is exactly the problem!
    Take a look at this comparison between RIM's Revenue mix in Q3 FY 2009 vs. Q3 FY 2013:
    source: RIM's Earnings Releases
    As you can see back in Q3 FY 2009, a fiscal year in which RIM made $1.9 Billion or $3.35 in Earnings and whose share price was trading at much higher levels, Service Revenues were only 1/3 of what they are today.
    And I strongly suggest you read the end on their site !
    Why the Decline in RIM's Service Revenue Doesn't Matter - AAPL, GOOG, NOK, RIMM - Foolish Blogging Network
    Last edited by Superfly_FR; 01-14-13 at 12:31 PM. Reason: didn't have to put anyone into this. sry.
    anon(3310921) likes this.
    01-14-13 09:49 AM
  2. TomJasper's Avatar
    Lets not wake up flip flop zUmi,lol.
    I so disagree with his analysts weeks/months back and still do today.
    Nuff said.

    01-14-13 10:38 AM
  3. anon(3310921)'s Avatar
    Lets not wake up flip flop zUmi,lol.
    I so disagree with his analysts weeks/months back and still do today.
    Nuff said.
    Be easy. . .Umi's been quite clear and realistic. . .I don't think he'd disagree with what this article is presenting. . .We all agree that the introduction of new hardware with a better average sealing price will help enough to make up for any change in service revenue. . .so what's the problem?
    01-14-13 12:18 PM
  4. Superfly_FR's Avatar
    Be easy. . .Umi's been quite clear and realistic. . .I don't think he'd disagree with what this article is presenting. . .We all agree that the introduction of new hardware with a better average sealing price will help enough to make up for any change in service revenue. . .so what's the problem?
    I'm pretty sure he's stated the same comparison, where RIM historically had revenues mainly from devices and that services have saved RIM lately due to subscribers growth. Now that ASP will return to "normal" (the $600+ range), revenues will arrive accordingly.
    But I must say I'm pretty embarrassed (and sorry) putting Chris into this ... so, I'll edit that line. Article is good enough.
    01-14-13 12:27 PM
  5. CranBerry413's Avatar
    Très intéressant Mon Ami.

    But it begs the question: What are the Wall Streeters (I apologize, I'm unsure of the French Equivalent i.e Bay Street for our Canadians Cousins) seeing in these Service Revenue?

    Umi made a great point, they are important, and in a crunch RIM needs all the extra money. But, that chart you presented is quite telling. Hopefully, there is a competent explanation.
    01-14-13 12:29 PM
  6. Superfly_FR's Avatar
    Très intéressant Mon Ami.

    But it begs the question: What are the Wall Streeters (I apologize, I'm unsure of the French Equivalent i.e Bay Street for our Canadians Cousins) seeing in these Service Revenue?

    Umi made a great point, they are important, and in a crunch RIM needs all the extra money. But, that chart you presented is quite telling. Hopefully, there is a competent explanation.
    IMHO
    If you look at the stock during the earnings call, it first went fast upwards. Then, when Thor spoke about revenues, it plunged down. Because a fast read would be "RIM have 70% of its revenue from services, if services fees decrease, they're dead". What this approach brings is that RIM has survived with revenues while discounting its devices to keep its subscribers base high. But this is an abnormal situation (name it crisis plan). The 70-30 repartition should be 70 for hardware and 30 for services, as it was before. BB10 ASP will make this append, if RIM sells enough (street consensus : 18 million devices). What was a pain turns to be an advantage, while RIM will still collect some $$ with services for OS5/6/7 devices that won't disappear in a quarter. Once BB10 widely spread, then RIM will be in the same position than other brands ... hopefully with some extra services fees (Enterprises, B2B (QNX devices connectivity ?)) and revenues from appWorld and Media broadcasting.
    (hope this is understandable lol).
    Last edited by Superfly_FR; 01-14-13 at 01:45 PM.
    anon(3310921) likes this.
    01-14-13 12:38 PM
  7. TomJasper's Avatar
    Jan 30 2013 this will be put to rest.
    01-14-13 01:34 PM
  8. CranBerry413's Avatar
    IMHO
    If you look at the stock during the earnings call, it first went fast upwards. Then, when Thor spoke about revenues, it plunged down. Because a fast read would be "RIM have 70% of its revenue from services, if services fees decrease, they're dead". What this approach brings is that RIM has survived with revenues while discounting its devices to keep its subscribers base high. But this is an abnormal situation (name it crisis plan). The 70-30 repartition should be 70 for hardware and 30 for services, as it was before. BB10 ASP will make this append, if RIM sells enough (street consensus : 18 million devices). What was a pain turns to be an advantage, while RIM will still collect some $$ with services for OS5/6/7 devices that won't disappear in a quarter. Once BB10 widely spread, then RIM will be in the same position than other brands ... hopefully with some extra services fees (Enterprises, B2B (QNX devices connectivity ?)) and revenues from appWorld and Media broadcasting.
    (hope this is understandable lol).
    18 Million? That is a tall order Mon Ami. Although, if they can get enough momentum, I'm sure that is doable. I'm excited for the challenge, and I think we can overcome the obstacles.
    01-14-13 02:37 PM
  9. Superfly_FR's Avatar
    18 Million? That is a tall order Mon Ami. Although, if they can get enough momentum, I'm sure that is doable. I'm excited for the challenge, and I think we can overcome the obstacles.
    18 million (in a year) would be a moderate success ... yet success. I believe they will sell more. Much more. Say 30. [add salt, pepper, mustard,ketchup ]
    01-14-13 05:22 PM
  10. anon(3310921)'s Avatar
    18 Million? That is a tall order Mon Ami. Although, if they can get enough momentum, I'm sure that is doable. I'm excited for the challenge, and I think we can overcome the obstacles.
    18 Million is actually not a huge hurdle if we are talking about total units sold in the first fiscal year of BB10 being on the market. . . remember RIM shiped close to 7 million units of "old and outdated phones" in the last reported quarter. . .
    01-14-13 07:05 PM

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