08-04-10 02:47 PM
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  1. Masahiro's Avatar
    1) RIM (and the BlackBerry name) were very much associated with cutting-edge technology 4 years ago. BlackBerry smartphones, with their advanced communications ability and push email (not to mention enterprise solutons) were the bleeding edge (and to some degree RIM's pagers before the smartphone era were as well). From a marketing point of view, sacrificing that position is never positive, regardless of who it appeals to.
    It still is "cutting-edge" in that regard. No other phone does push like BlackBerry does.

    2) While I completely agree that for "most" people a non-bleeding-edge phone is fine (if not preferable), there's also a serious problem with that market segment from a profitability point of view. Those people seek value pricing in a phone, rather than value in features (at a higher cost). The result is you are forced into reduced margins, which in turn requires progressively higher volumes to support.
    I don't see how that's a problem... Any market leader in any given industry focuses on products that are cheap and affordable by the masses. Just look at Toyota, McDonalds, Walmart, IKEA, etc... You'll notice a trend that not only do these companies all offer affordable, low-cost products, but they are spread all throughout the world.

    Yes, the margins are lower, but what really matters is net profit. If that means having to sell devices to many more people, so be it. It only helps to spread the brand name that is Blackberry. Not to mention, it snowballs with the popularity of BBM if a lot of people can afford to get on it. As overrated as a lot of people may think it is, it is a huge draw for a lot of people.

    It's not just a matter of the cost of the phone itself either. I'm not sure if it's the same in the US, but in Canada, the BlackBerry is the only smartphone that has a plan that gives unlimited e-mail, instant messaging and BBM at around half the cost of a full data plan. A lot of the people I know opt for that, as they see little use for web browsing or apps, but love to use BBM.

    But really, what's the point of selling a phone with a large profit margin if only so many people buy it in the first place?
    07-09-10 01:38 AM
  2. Cyber Warrior's Avatar
    From Blackberry Cool..

    Rumor: Verizon LTE BlackBerry Storm 3 to Feature Unique OS

    Posted by BlackBerry Cool
    on June 28, 2010,

    The BlackBerry Storm 3 specs are very much a rumor right now but there are a few interesting talking points worth mentioning. The major rumors here are that the Storm 3 will feature upwards of 1GB of flash memory, a 1GHz processor, a new OS (not OS 6 but rather an OS on its own) and it could be one of the first LTE devices on Verizon’s upgraded network.
    Other rumors about the Storm 3 include:
    • Tested in a very private beta to prevent leaks.
    • Currently disguised as a Storm2 in case an engineer gets drunk and leaves it at a bar.
    • 8GB internal memory.
    • Lots of personalization and the ability to run widgets.
    • The screen will be something we haven’t seen yet. It could be a Synaptics touchscreen that would make for a much .
    So far it sounds like the new Storm is going to be something very different than its predecessors. Hopefully this new OS is something that will mean more apps, usability and overall a better end user experience.
    07-09-10 02:01 AM
  3. ottscay#CB's Avatar
    It still is "cutting-edge" in that regard. No other phone does push like BlackBerry does.
    I can't personally disagree with that, it's the main reason (along with world-phone status) that I use a BB. But the former just doesn't blow the skirt up of the average consumer anymore (which is unfortunate) and the latter just doesn't apply to enough people to really generate large sales numbers in the consumer space.

    I don't see how that's a problem... Any market leader in any given industry focuses on products that are cheap and affordable by the masses. Just look at Toyota, McDonalds, Walmart, IKEA, etc... You'll notice a trend that not only do these companies all offer affordable, low-cost products, but they are spread all throughout the world.
    That's quite a lot of companies and industries, but briefly: Automobile margins are held in check most of the time because of the overall investment that has to be made into each project (and the longer development time). Also, Toyota makes Lexus for a reason, and it's an important marketing reason that impacts people who purchase a Corolla.

    Food industries are in no way comparable to tech devices. Everyone has to eat, so your brand name doesn't work the same way. What passes as "not worth buying" in the tech consumer industry is "pleasantly dependable" in the fast food and food retail market. Also, the way overall population growth and economic development work means that market dynamics are not the same in terms of growth space.

    Walmart and IKEA are...well they are not terribly similar actually, but Walmart is a retail space for other people's products. That means that when they sell price value they aren't sacrificing their own brand value, they are building it, often at the expense of other brands. Sometime spend a day in Walmart and see how many brand names actually refuse to put their real names on the lable without a qualifier (just off the top of my head Levi jeans and Carter's baby and toddler clothing does this). Ikea actually brands other people's products under their own brand, and they see some of the same pressures to maintain quality/high margin items at the same time as they make volume/value sales. That said, Ikea also sells a LOT more product lines, and the development cycle/sunset period for products is longer (and hence more foregiving) then phones and other techy consumer items.

    Yes, the margins are lower, but what really matters is net profit. If that means having to sell devices to many more people, so be it. It only helps to spread the brand name that is Blackberry. Not to mention, it snowballs with the popularity of BBM if a lot of people can afford to get on it. As overrated as a lot of people may think it is, it is a huge draw for a lot of people.
    To be honest, I wish this were true. But what actually matters is showing growth in your revenue AND your profits. The problem is that RIM is not showing net profit growth at a rate that is inspiring investor confidence. And while I don't wholly agree with the market pressures that drive this, they are still the reality that has, for example, cause Nokia to shed a ridiculous amount of market value even as they continue to lead the world in smart phone sales. It's why DVD has to be sunsetted with the introduction of another follow up product. When you are generating volume by reducing margins, you WILL hit a point of market saturation eventually, and at that point you're screwed if that's the only game you are playing.

    It's not just a matter of the cost of the phone itself either. I'm not sure if it's the same in the US, but in Canada, the BlackBerry is the only smartphone that has a plan that gives unlimited e-mail, instant messaging and BBM at around half the cost of a full data plan. A lot of the people I know opt for that, as they see little use for web browsing or apps, but love to use BBM.
    Let me reiterate that personally I agree with you. Also, as a marketing factor reduced cost of ownership is certainly a positive value, as long as that is getting conveyed to consumers. And in RIM's case I've seen several insider comments that suggest that their ability to reduce data drag on networks endears them to several carriers. But these are just strategic relationships. If you can't continue to drive interest at higher profit-margin and maintain the appeal of your brand, you are still fighting a losing battle.

    But really, what's the point of selling a phone with a large profit margin if only so many people buy it in the first place?
    Because the math works out in favor of the higher priced items over time. Getting $100-300 per phone and selling a million of them in a week due to popularity cannot be compensated easily when you are getting $40 per phone. There is a finite number of costumers, and too many of them prefer to spend more. Worse, even if for a given year it works out, the following year you both have to add value. A 20% drop to a phone that costs $200 with a 2 yr contract sounds impressive...it doesn't sound impressive if the phone is $50, or free with a 2 yr contract. So ironically lower-margin products have to sacrifice a larger percentage of profits just to maintain appeal. Plus, if you are innovating at the bleeding-edge you can just announce a newer, cooler item a year later at the same price, and the quarter of a billion in revenue generated in a couple weeks easily covers your development costs. But how much money can be maintained for R&D to make another phone that nets you $40 or less to make it's successor?

    I'm am NOT bashing RIM, or saying that they are only going to try for the value market. Nor am I faulting a strategy that involves greater penetration into the value market. But the efficient way to do so is to migrate features already paid for by high-margin phones downstream, not by sacrificing the high margin range and just concentrating on higher volume/lower margin sales. Even if it works for a couple quarters (and it didn't the last few) it's a losing strategy in the long term.

    I'm just trying to explain why other companies are trying for the high end, and why many poster's on these boards are concerned when it appears that RIM isn't trying for the high end (or isn't doing so successfully enough). Now...I think the Storm 3, especially if it's an earl LTE device, sounds like a very solid step in the right direction. And we all have read the rumors that the Storm 4 is the "iPhone killer" (which I hope is true) and I'm excited by the fact that the company is reaching for the top. I think that as long as they keep working to innovate at the same time as they broaden their sales strategy they will come out ok in the end. I just can't agree with a strategy that involves sacrificing the profti-growth segment entirely in favor of a high volume/low margin strategy that traps them into a downward spiral.
    07-09-10 02:43 AM
  4. Masahiro's Avatar
    I can't personally disagree with that, it's the main reason (along with world-phone status) that I use a BB. But the former just doesn't blow the skirt up of the average consumer anymore (which is unfortunate) and the latter just doesn't apply to enough people to really generate large sales numbers in the consumer space.
    That's ok. High-end specs probably don't impress the average consumer either.

    That's quite a lot of companies and industries...
    It is, and I don't mean to imply that all industries are similar. The point is, each company focuses on distribution, reaching out to as many customers as possible. RIM is the same. That's why they offer many form factors on many carriers with many different price points. They don't just sell a bunch of Curves. I'm not really going to focus on this topic though, as it will only get even more off topic. This thread is about the Storm 3, after all.

    To be honest, I wish this were true. But what actually matters is showing growth in your revenue AND your profits. The problem is that RIM is not showing net profit growth at a rate that is inspiring investor confidence.
    This doesn't surprise me. RIM did not release any phones last quarter. Let's see how well they do after they release the Storm3, Slider, and OS6.

    When you are generating volume by reducing margins, you WILL hit a point of market saturation eventually, and at that point you're screwed if that's the only game you are playing.
    That point is a long ways away. Most people in NA still use dumbphones. While smartphones aren't just for the early adopters anymore, it's still transitioning into the main stream. Besides, it's not just NA we're talking about here...

    Anyways, this is getting far too off-topic.
    07-09-10 03:15 AM
  5. stsurbrook's Avatar
    ottscay,

    +1 dude, +1!

    I'm just trying to explain why other companies are trying for the high end, and why many poster's on these boards are concerned when it appears that RIM isn't trying for the high end (or isn't doing so successfully enough). Now...I think the Storm 3, especially if it's an earl LTE device, sounds like a very solid step in the right direction. And we all have read the rumors that the Storm 4 is the "iPhone killer" (which I hope is true) and I'm excited by the fact that the company is reaching for the top. I think that as long as they keep working to innovate at the same time as they broaden their sales strategy they will come out ok in the end. I just can't agree with a strategy that involves sacrificing the profti-growth segment entirely in favor of a high volume/low margin strategy that traps them into a downward spiral.
    I hear you. However, RIM claimed the Storm 1 was an iPhone killer. So I'm not going to hold my breath that this two generations hence "unobtanium" version will FINALLY be it.

    However, I have yet to even see any RIM strategic memos, 10K filings, shareholder's releases, etc. that indicate anything other than "more of the same". I've had to step back from the BB Kool-aid for a minute. I realized I'd be initially excited about a S3 with confirmed specs that are comparable to the current generation of Android phones. And that is the problem. I'd be excited if RIM were to just match today's market, much less put out something leading edge.

    Unfortunately, even an announcement (and we haven't even heard of an announcement of an announcement) is still at least 30 days ahead of a release and probably 90+ days. So comparable hi-end stats today means good stats in 90+ days and average in 180 days. They need to be shooting for where the market is going to be, not where it is. And, as Intel has demonstrate, ultra-low voltage (their SU line of laptop processors), but still powerful multi-core processors are possible, especially with speed throttling built in so high speed and long battery life are not mutually exclusive ideas.

    I mean fairly reliable speculation puts 2ghz processors (Motorola "Droid Pro") by the end of the year and dual-core in the first half of 2011.

    And we haven't mentioned the big deal of the phones serving as "Mi-Fi" hotspots. To me, that is important for the S3 and essential for the S4. Again, it's a question of "will" and I don't know if RIM has it.

    Come on RIM give a dog a bone here...

    Scott
    Last edited by stsurbrook; 07-09-10 at 03:33 AM.
    07-09-10 03:15 AM
  6. stsurbrook's Avatar
    That's ok. High-end specs probably don't impress the average consumer either.

    <Snip>

    That point is a long ways away. Most people in NA still use dumbphones. While smartphones aren't just for the early adopters anymore, it's still transitioning into the main stream. Besides, it's not just NA we're talking about here...
    The problem is, as ottscay pointed out is that the average consumer is in the "commodity phone" market. The margins on commodities are very low and it is VERY hard to survive in that market... a point that almost killed Motorola and is hurting Nokia (their market share may be good in Europe, but stinks here in NA).

    The profit is in the leading edge of the market. The bleeding edge can be very profitable also, but the risks are much higher (see the Kin phone by Microsoft, RIP). In the leading edge, you make money in three ways. First, you make higher margins per phone sold because early adopters are willing to pay more for more. Second, you make money by having an extended life for those phones as they work their way down market. Third, you make money by those phones serving as market share advertising.

    Also, there is not nearly as much profit in business sales as there are in consumer sales. Businesses demand discounts. In some ways it is like fleet sales in the automobile industry. GM, Ford, and Chrysler were "killing it" in fleet sales. The problem was that those sales numbers were hiding some serious structural problems in the firms that the recession exposed. Ford was "fortunate" to hit their crisis point a couple years earlier while the economy was still looking good, which forced them to fix their problems and allow them to get financing to fund the fixes.

    The question is, "Is RIM a Ford or GM?? I don't know. However, their silence does not seem to be a good indicator right now. Still, I'm going to wait another month or so on the hope some news will come out and that such news will be good enough to stick around for.

    Scott

    PS. BTW, if you are a student at a 4 year university, it is likely your university has a deal that will give it a 19% discount on your account (VZW and maybe other carriers). You only need to have a valid university email address to qualify. Check with the companies you work for also, they may have discounts that extend to employees also.
    07-09-10 03:31 AM
  7. Masahiro's Avatar
    The problem is, as ottscay pointed out is that the average consumer is in the "commodity phone" market. The margins on commodities are very low and it is VERY hard to survive in that market... a point that almost killed Motorola and is hurting Nokia (their market share may be good in Europe, but stinks here in NA).
    So why is RIM doing just fine financially? Here's the thing. RIM enjoys a very good relationship with most carriers, and I've read that RIM gets a nice cut of carrier revenue. Their source of revenue is not only from phones:

    "By contrast, RIM has elected to partner with carriers in the belief that both sides would benefit. Under the agreements, the wireless carrier markets and sells the devices along with rate plans to its customers, leaving RIM free to focus on hardware and software production and development. RIM currently has agreements with some 300 carriers in 120 countries.

    In addition to being paid for the devices themselves, RIM also receives a significant cut estimated by analysts to be between 10 per cent and 40 per cent of the carrier's monthly subscriptions in exchange for handling the email traffic and providing customer support."

    Source: CEO Balsillie shrugs off 'BlackBerry killer' - thestar.com
    07-09-10 03:47 AM
  8. stsurbrook's Avatar
    So why is RIM doing just fine financially? Here's the thing. RIM enjoys a very good relationship with most carriers, and I've read that RIM gets a nice cut of carrier revenue. Their source of revenue is not only from phones:

    "By contrast, RIM has elected to partner with carriers in the belief that both sides would benefit. Under the agreements, the wireless carrier markets and sells the devices along with rate plans to its customers, leaving RIM free to focus on hardware and software production and development. RIM currently has agreements with some 300 carriers in 120 countries.

    In addition to being paid for the devices themselves, RIM also receives a significant cut – estimated by analysts to be between 10 per cent and 40 per cent – of the carrier's monthly subscriptions in exchange for handling the email traffic and providing customer support."

    Source: CEO Balsillie shrugs off 'BlackBerry killer' - thestar.com
    First, I'd like to congratulate you on actually providing a link to your source and one that isn't quoted to death! However, that article is 3 years old now and a lot has changed.

    If VZW was satisfied with RIM, they wouldn't be pushing the Android phones like they are. RIM does have a separate "data plan" that everyone has to sign up for and, I believe, they get the lion's share of the money (BIS).

    And the window of advantage with the push email is closing. Already there is a "push" email app for Android (K-9 in the Android Marketplace) that is only $2. It is supposed to offer the same functionality as RIM's email. The reality is that they are not there yet, but, IMO, it is only a matter of time before they get it right. At that point, I would expect to see a "Pro" version that offers a comparable experience for significantly less than what RIM charges.

    In addition, it doesn't take a genius to see that Google is putting together a package with Google Voice that will likely include universal push email (through gmail), calendar (Google Calendar), and other features RIM doesn't currently provide. And that doesn't include what you can do with Google Docs with a decent browser (and RIM's is pathetic!).



    Google is laying the groundwork and I don't see/know what RIM is doing to compete...

    Hey, while it may not seem like it, I WANT to stay with RIM (at least for one more generation)! However, my S1 is, at least to me, equivalent to what the Motorola RAZR was to the S1 when it was released. The S2 is only slightly better.

    I LIKE Surepress. I LIKE RIM's push email. I even like their Calendar app. But the S3 needs to be a significant step up to keep me.

    Best regards,

    Scott
    07-09-10 04:46 AM
  9. The_Engine's Avatar
    So why is RIM doing just fine financially? Here's the thing. RIM enjoys a very good relationship with most carriers, and I've read that RIM gets a nice cut of carrier revenue. Their source of revenue is not only from phones:

    "By contrast, RIM has elected to partner with carriers in the belief that both sides would benefit. Under the agreements, the wireless carrier markets and sells the devices along with rate plans to its customers, leaving RIM free to focus on hardware and software production and development. RIM currently has agreements with some 300 carriers in 120 countries.

    In addition to being paid for the devices themselves, RIM also receives a significant cut estimated by analysts to be between 10 per cent and 40 per cent of the carrier's monthly subscriptions in exchange for handling the email traffic and providing customer support."

    Source: CEO Balsillie shrugs off 'BlackBerry killer' - thestar.com
    That is a double edged sword. Because of this carriers charge more for data on BB's. VZW adds $15 a month to BES users. T Mobile is $10 more for BES. I don't know about ATT or Other cariers. So yes RIM sees $$$ there and from BES licensing. However when Apple can now tout almost all of the security features that BES has (http://images.apple.com/iphone/busin...e_Security.pdf), and data plans are cheaper, and there is no BES licensing, and in many cases EE's have their own iPhone, and EE's want and iPhone more than an 8520...well it all adds up negatively for RIM.
    07-09-10 04:56 AM
  10. Masahiro's Avatar
    First, I'd like to congratulate you on actually providing a link to your source and one that isn't quoted to death! However, that article is 3 years old now and a lot has changed.
    A lot has changed, indeed (I wish I had a more up-to-date source), but I don't see how the relationship between RIM and the carriers in particular would have changed that much. RIM seems to still be doing what it always did in that regard. They still handle e-mail through their NOC, and they still do a bit of customer support. If anything, the relationship would have only improved as more people switch to data phones. RIM offers data-efficient smartphones, and I'm sure carriers are very appreciative of that, as they see more and more data traffic going through their networks. Either way, the point is that RIM has numerous sources of income other than just its "low-margin" handsets. Just for the record, there are more carriers out there than just VZW.

    Anyways, this is getting far too off-topic (and is rapidly turning into another RIM VS Android threads which I always try to avoid).
    Last edited by Masahiro; 07-09-10 at 05:20 AM.
    07-09-10 05:01 AM
  11. The_Engine's Avatar
    +1.

    They are releasing a phone at some point in the future to compete phones that came out 6 months ago.

    What is wrong with this picture?

    Posted from my CrackBerry at wapforums.crackberry.com
    Not so sure on this. The latest android superphones including the Droid x are still sporting 1 ghz chips with 512 mbs of ram. If S3 has 1 ghz processor and 1gb of RAM then it is ahead of that. Also since we don't know the processor its hard to say. If it is LTE the Qualcomm LTE chips are really impressive. So of they have one of those puppies in there the performance should be solid. And that is what the chip is about right? Who cares about the # of cores or ghz. It needs to run the device fluidly with no lag.

    Also if it is the first or second LTE device to launch and it running on a QNX or Unix based core it may very well be a solid entry in the smartphone arena for end of 2010 or early 2011.

    To me it will really be about software bild quality. That has been where RIM has failed in my opinion.

    Posted from my CrackBerry at wapforums.crackberry.com
    07-09-10 07:30 AM
  12. 1magine's Avatar
    I can't personally disagree with that, it's the main reason (along with world-phone status) that I use a BB. But the former just doesn't blow the skirt up of the average consumer anymore (which is unfortunate) and the latter just doesn't apply to enough people to really generate large sales numbers in the consumer space.



    That's quite a lot of companies and industries, but briefly: Automobile margins are held in check most of the time because of the overall investment that has to be made into each project (and the longer development time). Also, Toyota makes Lexus for a reason, and it's an important marketing reason that impacts people who purchase a Corolla.

    Food industries are in no way comparable to tech devices. Everyone has to eat, so your brand name doesn't work the same way. What passes as "not worth buying" in the tech consumer industry is "pleasantly dependable" in the fast food and food retail market. Also, the way overall population growth and economic development work means that market dynamics are not the same in terms of growth space.

    Walmart and IKEA are...well they are not terribly similar actually, but Walmart is a retail space for other people's products. That means that when they sell price value they aren't sacrificing their own brand value, they are building it, often at the expense of other brands. Sometime spend a day in Walmart and see how many brand names actually refuse to put their real names on the lable without a qualifier (just off the top of my head Levi jeans and Carter's baby and toddler clothing does this). Ikea actually brands other people's products under their own brand, and they see some of the same pressures to maintain quality/high margin items at the same time as they make volume/value sales. That said, Ikea also sells a LOT more product lines, and the development cycle/sunset period for products is longer (and hence more foregiving) then phones and other techy consumer items.



    To be honest, I wish this were true. But what actually matters is showing growth in your revenue AND your profits. The problem is that RIM is not showing net profit growth at a rate that is inspiring investor confidence. And while I don't wholly agree with the market pressures that drive this, they are still the reality that has, for example, cause Nokia to shed a ridiculous amount of market value even as they continue to lead the world in smart phone sales. It's why DVD has to be sunsetted with the introduction of another follow up product. When you are generating volume by reducing margins, you WILL hit a point of market saturation eventually, and at that point you're screwed if that's the only game you are playing.



    Let me reiterate that personally I agree with you. Also, as a marketing factor reduced cost of ownership is certainly a positive value, as long as that is getting conveyed to consumers. And in RIM's case I've seen several insider comments that suggest that their ability to reduce data drag on networks endears them to several carriers. But these are just strategic relationships. If you can't continue to drive interest at higher profit-margin and maintain the appeal of your brand, you are still fighting a losing battle.



    Because the math works out in favor of the higher priced items over time. Getting $100-300 per phone and selling a million of them in a week due to popularity cannot be compensated easily when you are getting $40 per phone. There is a finite number of costumers, and too many of them prefer to spend more. Worse, even if for a given year it works out, the following year you both have to add value. A 20% drop to a phone that costs $200 with a 2 yr contract sounds impressive...it doesn't sound impressive if the phone is $50, or free with a 2 yr contract. So ironically lower-margin products have to sacrifice a larger percentage of profits just to maintain appeal. Plus, if you are innovating at the bleeding-edge you can just announce a newer, cooler item a year later at the same price, and the quarter of a billion in revenue generated in a couple weeks easily covers your development costs. But how much money can be maintained for R&D to make another phone that nets you $40 or less to make it's successor?

    I'm am NOT bashing RIM, or saying that they are only going to try for the value market. Nor am I faulting a strategy that involves greater penetration into the value market. But the efficient way to do so is to migrate features already paid for by high-margin phones downstream, not by sacrificing the high margin range and just concentrating on higher volume/lower margin sales. Even if it works for a couple quarters (and it didn't the last few) it's a losing strategy in the long term.

    I'm just trying to explain why other companies are trying for the high end, and why many poster's on these boards are concerned when it appears that RIM isn't trying for the high end (or isn't doing so successfully enough). Now...I think the Storm 3, especially if it's an earl LTE device, sounds like a very solid step in the right direction. And we all have read the rumors that the Storm 4 is the "iPhone killer" (which I hope is true) and I'm excited by the fact that the company is reaching for the top. I think that as long as they keep working to innovate at the same time as they broaden their sales strategy they will come out ok in the end. I just can't agree with a strategy that involves sacrificing the profti-growth segment entirely in favor of a high volume/low margin strategy that traps them into a downward spiral.
    One of the brightest, most well written, business minded posts I've read on Crackberry. Well done.

    Posted from my CrackBerry at wapforums.crackberry.com
    07-09-10 08:09 AM
  13. stsurbrook's Avatar
    Masahiro,

    As noted by The_Engine, that alternative revenue stream still means that we pay an extra $15/mo for push email. That can be a tough sell in this economy.

    At the time of the article, RIM/BB was driving a lot of new customer signups and also driving more expensive talk, data, and IM plans. However, that is less the case today. Also, with the advent of other, capable, popular platforms, the carriers are now seeing that they can deliver much the same experience (and in many cases a superior experience for the things consumers are interested in such as web, social networking, texting, navigation, etc.) for a lower cost to the consumer, but an almost equivalent revenue stream for them.

    Two years ago the carriers were putting the $'s and, perhaps more importantly, shelf space into promoting RIM/BB that they now are into these alternative platforms. It is a negative perceptional shift that is damaging to a tech firm like RIM.

    And almost perfect analog would be IBM and then Dell. Both firms were almost unassailable in the PC world at different respective times and both lost their position due, in part, to a shift in perception of the customers. Both loss the ability to charge a premium for their brand as other firms began to be perceived as providers of (almost) equivalent products. At that point, their lost their ability to charge for a premium product and did not have a good answer to this shift and have not been able to recover.

    As for RIM providing "data efficient" smartphones that is only because they are currently less capable of utilizing the bandwidth... they are less capable.

    And yes, I realize that VZW is not the only carrier out there. I was using them as an example to illustrate the point. The same points apply equally to other carriers as well.

    Hey, I hear you about not wanting to get into a RIM vs. (insert phone here) thread. What I'm trying to do is illustrate is that the market is changing, fundamentally, and I'm not sure that RIM has the corporate strategy/mindset to take deal with it, much less take advantage of it.

    I'm HOPING they do/will. I just don't have the confidence that they do to keep me around indefinitely when I'm being constricted in what I can do by the phone I have. I need more and only have highly speculative rumors going around for RIM's products compared to actual/declared products from competitors.

    If I go by the time frame of the S1's solid rumors to actual product delivery, we are looking at a minimum of 90 and up to 180 days (depending on what you consider "solid rumors") before we will see the S3. I might be able to stretch 90 days, but not 180.

    Hope springs eternal... :/

    Scott
    07-09-10 08:15 AM
  14. cplush's Avatar
    I can't personally disagree with that, it's the main reason (along with world-phone status) that I use a BB. But the former just doesn't blow the skirt up of the average consumer anymore (which is unfortunate) and the latter just doesn't apply to enough people to really generate large sales numbers in the consumer space.



    That's quite a lot of companies and industries, but briefly: Automobile margins are held in check most of the time because of the overall investment that has to be made into each project (and the longer development time). Also, Toyota makes Lexus for a reason, and it's an important marketing reason that impacts people who purchase a Corolla.

    Food industries are in no way comparable to tech devices. Everyone has to eat, so your brand name doesn't work the same way. What passes as "not worth buying" in the tech consumer industry is "pleasantly dependable" in the fast food and food retail market. Also, the way overall population growth and economic development work means that market dynamics are not the same in terms of growth space.

    Walmart and IKEA are...well they are not terribly similar actually, but Walmart is a retail space for other people's products. That means that when they sell price value they aren't sacrificing their own brand value, they are building it, often at the expense of other brands. Sometime spend a day in Walmart and see how many brand names actually refuse to put their real names on the lable without a qualifier (just off the top of my head Levi jeans and Carter's baby and toddler clothing does this). Ikea actually brands other people's products under their own brand, and they see some of the same pressures to maintain quality/high margin items at the same time as they make volume/value sales. That said, Ikea also sells a LOT more product lines, and the development cycle/sunset period for products is longer (and hence more foregiving) then phones and other techy consumer items.



    To be honest, I wish this were true. But what actually matters is showing growth in your revenue AND your profits. The problem is that RIM is not showing net profit growth at a rate that is inspiring investor confidence. And while I don't wholly agree with the market pressures that drive this, they are still the reality that has, for example, cause Nokia to shed a ridiculous amount of market value even as they continue to lead the world in smart phone sales. It's why DVD has to be sunsetted with the introduction of another follow up product. When you are generating volume by reducing margins, you WILL hit a point of market saturation eventually, and at that point you're screwed if that's the only game you are playing.



    Let me reiterate that personally I agree with you. Also, as a marketing factor reduced cost of ownership is certainly a positive value, as long as that is getting conveyed to consumers. And in RIM's case I've seen several insider comments that suggest that their ability to reduce data drag on networks endears them to several carriers. But these are just strategic relationships. If you can't continue to drive interest at higher profit-margin and maintain the appeal of your brand, you are still fighting a losing battle.



    Because the math works out in favor of the higher priced items over time. Getting $100-300 per phone and selling a million of them in a week due to popularity cannot be compensated easily when you are getting $40 per phone. There is a finite number of costumers, and too many of them prefer to spend more. Worse, even if for a given year it works out, the following year you both have to add value. A 20% drop to a phone that costs $200 with a 2 yr contract sounds impressive...it doesn't sound impressive if the phone is $50, or free with a 2 yr contract. So ironically lower-margin products have to sacrifice a larger percentage of profits just to maintain appeal. Plus, if you are innovating at the bleeding-edge you can just announce a newer, cooler item a year later at the same price, and the quarter of a billion in revenue generated in a couple weeks easily covers your development costs. But how much money can be maintained for R&D to make another phone that nets you $40 or less to make it's successor?

    I'm am NOT bashing RIM, or saying that they are only going to try for the value market. Nor am I faulting a strategy that involves greater penetration into the value market. But the efficient way to do so is to migrate features already paid for by high-margin phones downstream, not by sacrificing the high margin range and just concentrating on higher volume/lower margin sales. Even if it works for a couple quarters (and it didn't the last few) it's a losing strategy in the long term.

    I'm just trying to explain why other companies are trying for the high end, and why many poster's on these boards are concerned when it appears that RIM isn't trying for the high end (or isn't doing so successfully enough). Now...I think the Storm 3, especially if it's an earl LTE device, sounds like a very solid step in the right direction. And we all have read the rumors that the Storm 4 is the "iPhone killer" (which I hope is true) and I'm excited by the fact that the company is reaching for the top. I think that as long as they keep working to innovate at the same time as they broaden their sales strategy they will come out ok in the end. I just can't agree with a strategy that involves sacrificing the profti-growth segment entirely in favor of a high volume/low margin strategy that traps them into a downward spiral.
    RIM needs to hire you....well done.
    07-09-10 08:17 AM
  15. Masahiro's Avatar
    Masahiro,

    As noted by The_Engine, that alternative revenue stream still means that we pay an extra $15/mo for push email. That can be a tough sell in this economy.
    I don't... A BIS data plan costs the same as any iPhone data plan here, and that is $25 for 500MB on most carriers.
    07-09-10 04:34 PM
  16. EnergyPlus's Avatar
    Some fascinating posts (good thread!). As I ponder some of these, I can't help but wonder if the issue of the proverbial "cart before the horse" isn't coming in to play. Yes, the economy sucks and people are looking at every way imaginable to cut their monthly costs, which would include any cell plan they may have or are considering having. But, at the same time, we are dealing with relatively new technology. Honestly, all of my friends and family, consider me a "techy kind of guy" (and, at the ripe old age of 60, I'm rather proud of), but amongst this same group, there are few that even remotely compare. That being said, while I was "techy" on all things computers (desktop and laptop) and video (DVD/Blueray, wide screen plasma tv's, stereos, etc.) I always bragged about my trusty old, LG brick phone. It worked (and still does) great! Clear, clear reception, made and received calls perfectly and was 100% reliable. I used to say "I don't need to carry a computer around with me, I don't need to respond to emails NOW, I don't need to read spreadsheets and Word documents and do calculations (my LG had a calculator, lol), etc. Then....I got a Blackberry and my whole world changed. Now, I can't imagine living without it. But my peers? Ha! Some do a bit of texting, two have BB's of their own, it used to be three but one defected to Android, and others still have, and are happy and content with, dumb phones.

    i suspect there's a good percentage of the population that feels the same way. Yesterday, either here or in another thread, I commented that with my work in the public, I often engage people in conversations about the phone I see them using (I never challenge them of course, but make polite inquiries about the brand and model they are using and ask if they like them, how they work, etc.) It has to be in the 90% range that they don't even know what model phone they have, let alone what OS or processor speed etc. They're simply not into it. As one guy said to me when I asked "Um, I dunno, it sends texts pretty good though..." LOL. I think this is indicative of the market place in general.

    So, yes, there will come a time when the marketeers of the world will cause many, many more people to "have to have" smartphones and probably, in the next five years or so, it will be hard to even find a dumb phone, let alone a market segment demanding them. Technology has to reach a tipping point before it reaches a point of saturation and I don't think we're quite there yet, though we're racing for the finish line with it. Meanwhile, there's too much catch-up to be done and super advanced phones, with higher profit margins are not, by themselves, going to satisfiy many companies. Even Apple could not settle for just the iPhone, they need the iPod and iPad and iThis and iThat to remain a profitable corporation and keep the shareholders happy.
    07-09-10 07:35 PM
  17. mountainman's Avatar
    Some fascinating posts (good thread!). As I ponder some of these, I can't help but wonder if the issue of the proverbial "cart before the horse" isn't coming in to play. Yes, the economy sucks and people are looking at every way imaginable to cut their monthly costs, which would include any cell plan they may have or are considering having. But, at the same time, we are dealing with relatively new technology. Honestly, all of my friends and family, consider me a "techy kind of guy" (and, at the ripe old age of 60, I'm rather proud of), but amongst this same group, there are few that even remotely compare. That being said, while I was "techy" on all things computers (desktop and laptop) and video (DVD/Blueray, wide screen plasma tv's, stereos, etc.) I always bragged about my trusty old, LG brick phone. It worked (and still does) great! Clear, clear reception, made and received calls perfectly and was 100% reliable. I used to say "I don't need to carry a computer around with me, I don't need to respond to emails NOW, I don't need to read spreadsheets and Word documents and do calculations (my LG had a calculator, lol), etc. Then....I got a Blackberry and my whole world changed. Now, I can't imagine living without it. But my peers? Ha! Some do a bit of texting, two have BB's of their own, it used to be three but one defected to Android, and others still have, and are happy and content with, dumb phones.

    i suspect there's a good percentage of the population that feels the same way. Yesterday, either here or in another thread, I commented that with my work in the public, I often engage people in conversations about the phone I see them using (I never challenge them of course, but make polite inquiries about the brand and model they are using and ask if they like them, how they work, etc.) It has to be in the 90% range that they don't even know what model phone they have, let alone what OS or processor speed etc. They're simply not into it. As one guy said to me when I asked "Um, I dunno, it sends texts pretty good though..." LOL. I think this is indicative of the market place in general.

    So, yes, there will come a time when the marketeers of the world will cause many, many more people to "have to have" smartphones and probably, in the next five years or so, it will be hard to even find a dumb phone, let alone a market segment demanding them. Technology has to reach a tipping point before it reaches a point of saturation and I don't think we're quite there yet, though we're racing for the finish line with it. Meanwhile, there's too much catch-up to be done and super advanced phones, with higher profit margins are not, by themselves, going to satisfiy many companies. Even Apple could not settle for just the iPhone, they need the iPod and iPad and iThis and iThat to remain a profitable corporation and keep the shareholders happy.

    Good point. The "Joe User" does not know, but anyone somewhat savy that I've known to have BB's have defected to the Android platform. My BBM contacts are all going away. I don't care really, because I am sticking this out - the S3 and S4 are going to rock.

    I was playing around with my friends EVO today for a good while - it certainly can rip web pages like crazy, but really, besides the gigunda screen, that is really it. It does the same things the BB S2 does. BB has a big future, we just have to be patient and wait it out. Those who do not need/want to wait will defect, which is what we are seeing now with the phone-of-the-month syndrome. Those that have BB's can appreciate the functionality and form factor that make BB's so easy to use (one-handed too).

    The iPhone is a joke - a complete mindjob that has garnered so much hype and false hope that "Joe User" would not know the difference between it and an LG Ally. Just look at all the problems with the iPhone4 - what a failure. And to be completely honest (and anti-Apple), I have used it and find it to be the worst touchscreen device I have ever had my two thumbs on.

    The S3 is ready to change the playing field. It will be the first consumer BB LTE device. It will be the first to sport a completely different OS developed for the Consumer demo. And it will be RIM's do or die entry into the touchscreen frenzy that is taking over phones/smartphones.

    I agree with everything you said - except the "have to have" part. It is becoming "want to have" - and that my friend is how RIM has to market the S3 - as a want to have device. Dumb phones will be sold eventually at every vending machine in the country.
    07-09-10 09:28 PM
  18. EnergyPlus's Avatar
    Well said, but I want to clarify this particular statement. Perhaps I was not clear enough (I worry that I type too much, lol) but the "have to have" vs. "want to have" emotions are, while true, changing, like everything else. Years ago, many people "wanted to have" a microwave oven, but it was a luxury item. Today, most (but not all, I understand) "have to have a microwave." Dual jobs, multiple jobs, family needs, tight schedules and the huge, HUGE availability of microwavable foods are causing the ovens to become a perceived necessity. Do we really "have to have" them? No, of course not, it's not like water or air, so the debate might well be over the interpretation of that phrase, but it is relatively easy to insert "have to..." in lieu of "want to...."

    Parents feel they "have" to be able to text their children (God forbid, they should actually CALL them, lol). Kids feel they have to be able to text their friends. Businessmen/women feel they have to have instant email and the ability to review spreadsheets, Word and PDF documents. How did we ever get along without these things just a few years ago? As we experience societal evolution, it's most always the case of what used to be a luxury, now becomes a necessity, whether or not that is an accurate feeling, it becomes the perceived truth and, as we all know, "perception is everything."

    I like your comment about vending machines though...just like disposable film cameras (and even a few with memory cards now), they are disposable but there if you really have to have one and are caught without your own, dumb phones will be that way as well. I can see it now: "$9.99 plus 10 minutes, buy now!" LOL

    I agree with everything you said - except the "have to have" part. It is becoming "want to have" - and that my friend is how RIM has to market the S3 - as a want to have device. Dumb phones will be sold eventually at every vending machine in the country.
    07-10-10 02:45 PM
  19. 1812dave's Avatar
    Well said, but I want to clarify this particular statement. Perhaps I was not clear enough (I worry that I type too much, lol) but the "have to have" vs. "want to have" emotions are, while true, changing, like everything else. Years ago, many people "wanted to have" a microwave oven, but it was a luxury item. Today, most (but not all, I understand) "have to have a microwave." Dual jobs, multiple jobs, family needs, tight schedules and the huge, HUGE availability of microwavable foods are causing the ovens to become a perceived necessity. Do we really "have to have" them? No, of course not, it's not like water or air, so the debate might well be over the interpretation of that phrase, but it is relatively easy to insert "have to..." in lieu of "want to...."

    Parents feel they "have" to be able to text their children (God forbid, they should actually CALL them, lol). Kids feel they have to be able to text their friends. Businessmen/women feel they have to have instant email and the ability to review spreadsheets, Word and PDF documents. How did we ever get along without these things just a few years ago? As we experience societal evolution, it's most always the case of what used to be a luxury, now becomes a necessity, whether or not that is an accurate feeling, it becomes the perceived truth and, as we all know, "perception is everything."

    I like your comment about vending machines though...just like disposable film cameras (and even a few with memory cards now), they are disposable but there if you really have to have one and are caught without your own, dumb phones will be that way as well. I can see it now: "$9.99 plus 10 minutes, buy now!" LOL
    What we NEED is:

    1. Shelter
    2. Clothing
    3. Food
    4. Water

    Even sex isn't a necessity to life. Well, for the continuation of the species it is, but it's not a requirement of one's own life. Phones, microwaves, cars, TV's are all desirous things to be sure, but none are necessary. I know I sure like all my "toys", but I recognize the difference between what is needed and want is nice to have.
    07-10-10 07:14 PM
  20. iBerry Lifestyle's Avatar
    A) @dave1812

    Just a correction. The most basic purpose in life for every living thing is:
    1) survival
    2) replication
    So sex is involved...premitive needs, reptilian brain, social dynamics, but I'm getting of topic.

    B)
    I really enjoy your arguments @EnergyPlus and @mountanman

    My take on your discussion is that those 90% "Joe users" that are not familiar with the world of smartphones or rather mobile phones in general, are easily impressed by successful marketing. They go for the Iphone 4 for example. Apple is fantastic at marketing. Does that mean we have to protect them from that? No, we don't. Is it legal scheming? I don't no, supposedly NO. People buy things that fulfill their needs, and who is to judge their needs. Nobody.
    An informed cutomer would choose differently, let alone people who switch from platform to platform. I do not refer to those people. All I am saying is that an UNinformed customer would rather be intrieged by an Iphone 4 than any other device, and thats mostly because of Apple's marketing.

    However, if you would rank the functionality of phones on a scale and then compare public's satisfaction with those, you would be surprised how many people are sattisfied with so little. Is it because they are so humble, probabely not, they simply don't know better.

    It has to be in the 90% range that they don't even know what model phone they have, let alone what OS or processor speed etc. They're simply not into it. As one guy said to me when I asked "Um, I dunno, it sends texts pretty good though..." LOL. I think this is indicative of the market place in general.
    Yeah right

    C) The argument about disposable phones in vending machines is already reality in Japan if I recall correctly.

    PS: I am looking forward to the Storm 3. As of my needs and standards for now my next device will likely be a Blackberry again. Should I don't like newer BBs I even rather consider older models like the Tour or the Bold 9700.
    Last edited by iBerry Lifestyle; 07-11-10 at 03:38 AM.
    07-11-10 03:17 AM
  21. 1812dave's Avatar
    A) @dave1812

    Just a correction. The most basic purpose in life for every living thing is:
    1) survival
    2) replication
    So sex is involved...premitive needs, reptilian brain, social dynamics, but I'm getting of topic.
    .
    Did you not notice my closing comments about sex? I said it wasn't a requirement of life, but IS a requirement for the continuation of the species.
    07-11-10 02:09 PM
  22. EnergyPlus's Avatar
    Ok, I think you guys are taking the "what we need" thing WAY TOO FAR. C'mon now, this is not a anthropology class. The term "need" is presented in the modern perspective of how we get along in our day to day lives. It can easily be argued that we "need" transportation, whether it be a car, a bike or some form of public transport. Yes, we could simply walk, but that may not be practical when trying to feed a family of four or commute to a job that is not next door, so we "need" transportation. On the other hand, when the phrase "need" is used when referring to a smartphone, the interpretation may be a bit more liberal, but please, let's not get bogged down in simple semantics.

    There is a distinct difference though, between say, a businessman/woman, who says "I need instant email to do my job properly" and a teenager saying "I need instant email so I can get messages from my girlfriend right away." While both needs are very REAL to the individual, they are distinctly different and arguably, unfounded in some circles. Still, as I said earlier, "perception is everything."
    07-11-10 02:39 PM
  23. matthewradio's Avatar
    i can only hope rim keeps the storm releases more innovative than the iPhone releases
    07-11-10 03:59 PM
  24. stsurbrook's Avatar
    Good point. The "Joe User" does not know, but anyone somewhat savy that I've known to have BB's have defected to the Android platform. My BBM contacts are all going away. I don't care really, because I am sticking this out - the S3 and S4 are going to rock.
    mountainman,

    I'm not picking your reply for a particular reason, just that this reply is the most recent to make these claims...

    Anyway, let's face facts. If you are in the market for a Storm 3, you aren't a "Joe User". Well, OK, you MIGHT be a Joe User, but chances are pretty likely you aren't. The Joe User's, as I believe they are being characterized here, are BB Bold or Curve customers, not Storm 3. If they only need basic phone and email, then those are the best phones for them. Possibly also the new slider phone for those of us whose eyesight is going and the screens on the Bold and Curve just don't cut it anymore.

    IMO, when we get to Storm 3 customers, we are looking at one of three types of people.

    The first is the business person who needs an intermediate communications device (intermediate, SOMEWHERE between a Bold/Curve and a netbook). For some of these people, they would love to have a device that could do presentations (at least feed a projector), etc. and access the web in "full glory" in addition to other functions. More would be better. These are the people who might also FIND new uses if the device were more capable!

    The second are those who buy "cool" phones like the iPhone, Android, etc. They may have a need for the functionality of the phones, but chances are they will never use them to their capacity. At best, social networking, email, text, music, video, and the web.

    The third, is what I would consider to be the "typical" (hardcore?) Crackberry member. The techno-geek who is out to explore the limits of the phone and probably upgrades their phone once a year.

    My point is that the Storm series (3 or 4) shouldn't be looked at as a phone for "Joe User" (or "Sixpack", if you prefer). Not to say that Joe wouldn't buy one, but that isn't (shouldn't) be their target market. If it is, they are in real trouble because I don't see Joe paying $200 for a phone when they can get a perfectly serviceable one for $50 or free.

    I guess I have viewed the Storm series (from the S1 on) as being RIM's flagship product. The purpose of a flagship product is to put the company's "best foot forward" and be the most competitive product available. And from that standpoint, it has always been a disappointment.

    I was playing around with my friends EVO today for a good while - it certainly can rip web pages like crazy, but really, besides the gigunda screen, that is really it. It does the same things the BB S2 does. BB has a big future, we just have to be patient and wait it out. Those who do not need/want to wait will defect, which is what we are seeing now with the phone-of-the-month syndrome. Those that have BB's can appreciate the functionality and form factor that make BB's so easy to use (one-handed too).
    I think the most important thing you said in this part of the quote is, "It does the same things the BB S2 does..."

    That right there, the impression (correct or not) that an Android phone can do what a Blackberry can do PLUS all the things a BB S2 (S3, S4?) cannot ought to be giving the people at RIM nightmares. Once this perceptual shift happens, once you take "Pandora out of the box", you can't get it back again.

    I think this is what many of us in the slightly (or more) pessimistic side of the discussion are worried about.

    The S3 is ready to change the playing field. It will be the first consumer BB LTE device. It will be the first to sport a completely different OS developed for the Consumer demo. And it will be RIM's do or die entry into the touchscreen frenzy that is taking over phones/smartphones.
    Even IF RIM delivers what you have outlined here, I don't see what is there that will "change the playing field". It MAY change the field that RIM is playing on. The problem right now is that they are playing in the league basement whereas their competitors are playing for the World Series. They are all in the Major Leagues, but have dramatically performance. And the firms at the top are filling their skill holes (roster) faster than RIM is.

    I agree with everything you said - except the "have to have" part. It is becoming "want to have" - and that my friend is how RIM has to market the S3 - as a want to have device. Dumb phones will be sold eventually at every vending machine in the country.
    The bottom line is that RIM needs to step up their game significantly. I just haven't seen any recent proof of that happening...

    I really do hope you are right and that I'm wrong on this. If for no other reason that competition, and choice, is always good for the consumer!

    Scott
    Last edited by stsurbrook; 07-12-10 at 09:49 AM. Reason: Quick edit...
    07-12-10 09:45 AM
  25. wchsxc's Avatar
    Kind of off topic and probably completely wrong but shouldn't all LTE devices be able to run on any given network? Also, considering that Verizon has released high-specd devices such as the Droid Incredible and now the Droid X and is going to release the Droid 2 very soon, it seems that they are not really caring too much about what devices are released when. If the LTE network is not going to be available until the beginning of next year, why would they commit so many individuals to a two year contract knowing that when the latest and greatest devices running on LTE come out (the ones everybody are going to want to have) a vast majority won't be near their new every 2?
    07-17-10 12:51 PM
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