Research in Motion reported 2nd quarter fiscal 2011 results yesterday, and, although many of RIM’s numbers were positive, several beating the street, the one that many will be looking at this morning, subscriber growth, missed for the second quarter in a row. RIM added 4.5 million net new subscribers… The street was expecting 4.9 to 5.2 million subscribers.
I believe that a big reason for that miss was underwhelming performance of RIM’s new flagship BlackBerry, the BlackBerry Torch 9800. RIM may tell you that the BlackBerry Torch has been the “most successful GSM BlackBerry launch in company history, but clearly, that wasn’t hard to be because the the Torch hasn’t sold nearly like RIM hoped it might. The big knock on the Torch is that it is underpowered… Slow processor, low resolution display, seems like a 3-year old device compared to it’s competitors, etc…
I think that this must of really be weighing on RIM co-CEO, Jim Balsillie, because when RBC analyst Mike Abramsky, who basically asked RIM co-CEO Jim Balsillie how the BlackBerry is going to keep up with the likes of Apple and Google, who have beat RIM (like a red-headed step child) in design and high-end phone specifications, he goes off on this epic rant…
There’s such an interesting dynamic going on in the market because first of all, when you talk about platform and design and future aspects, I think you’re going to be pleasantly surprised at DevCon in a week Monday. I can’t really give you too much here but I think you’re going to be really interested there. More aspects of the design philosophy are going to come out there.
I think in terms of what BlackBerry does, you know, it still has a tremendous number of attributes that really serve the market in the way that we align it for the service and for the carrier and for the segment that it’s supposed to address. And I think it’s dangerous to frame all this in a high-end arms race. And I think you’re going to see our capacity to go beyond what could have been expected by anyone and yet still address the issues of cost effectiveness, security, efficiency, and desired form factors.
Our specialty’s been in resolving a paradox, and if you don’t innovate to resolve that paradox… You know, robbing Peter to pay Paul isn’t really a solution because you’re just shifting strategies. The feature phones upgrading to a smartphone, I think our guidance just shows what’s happening. And if you saw the roadmap and you saw the engagement strategies you would see that we are being very prudent in our approaches.
But this is a really promising space, and we can address lots of segments. And we can still respect carrier alignment and efficiency, and different price points.
But, I think you’re going to see the ability to, I don’t know how to say it better, than other than “resolve the paradox.” Because if you make these things so high-end that they’re not addressable to the market, or they’re so consumptive of the networks they can’t scale, that’s not what we originally designed our business for.
And what we’ve done is innovate to really avail the capability but still not sell out our lineage, and that’s the paradox that we’re resolving. But be careful that just because you don’t jump to Peter and abandon Paul, to sort of carry on with that sort of approach, that we don’t have an answer. We’re trying to innovate, forward our business, not be strategically erratic.
The core BlackBerry aspects are well defended and looked after and protected. But it’s in a space where people have mushrooming expectations of what these things can do. And that’s the essence of the paradox. And all I can say is it won’t take long before you see how we’ve done that. And I think Torch and BlackBerry 6 is really an excellent step forward.
The promo campaigns are just really starting. But that’s why you’ve seen the jump in guidance… and the subs is that. I hope I answered your question. It’s hard for me to answer it too directly without sort-of violating confidential roadmap stuff.
I all know is that consumers aren’t buying your high end devices because, well, they aren’t high end. Not only that, long time BlackBerry users, like myself, are looking to other platforms because we can’t get what we want from you. If you think that you have to rob Peter to pay Paul, trading battery life for faster processors and bigger, brighter screens, then, you seriously need to walk into an AT&T, Sprint, or, heaven forbid a Verizon store so you can see just how well your competition is doing.
Peter and Paul aren’t who you need to be worried about because Mathew, Mark, Luke, and John are taking you to the cleaners.
Damn good post Robb… Sadly, it looks like it is time for so new talent at the top of RIM. I that both Jim Balsillie and Mike Lazaridus believe that because RIM has the biggest subscriber base and that they still sell a ridiculous number of BlackBerry devices that they know what consumers want. This is eerily reminiscent to the way that Palm was when they dismissed RIM in the year or so before the BlackBerry came in and took the top spot…
Sounds to me like it is time for you start up droidarkable and iphonearkable. RIM is dying a slow death…
for the last 8 quarters, you have been pointing to various weaknesses through what consistently has been good numbers…now you are looking at subcribers…did you forget about your last review of their weaknesses and the one before that and the one before that….the only one inconsistent is you…
RIM missed big last quarter… RIM missed significantly on net new subscribers this quarter as well. RIM’s stock price was down 25% in over the last 3 months and almost 40% since April.
If you call losing marketing share, a decrease quarter over quarter subscriber growth, and the launch of a flaghip device that is seen as a flub consistent, then we’ll just have to agree to disagree…
RIM only missed their guidance by 100k subs last quarter, this quarter was another miss but Q4 of 2010 was 400k above their high-end guidance and 700k above the street’s consensus. Yet no one heralded their surprising increase in new subscribers, they found another number to hold up and state that RIM was in trouble.
With the numerous articles all throughout July and August that talked about how Middle East countries along with India were going to ban RIM’s services, why are people suddenly surprised that their new subscriber numbers came in low? It’s nothing more than an attempt to find a reason why estimates were blown apart. Revenue – beat;Device shipments – beat;Net Income – beat; Margins – beat;EPS – beat; and more importantly the guidance was far beyond anything predicted by analysts.
Yes, the stock price has taken a big hit. But stock prices are not a rational assessment of a company’s performance. Ben Graham, Warren Buffett and other investors built their fortunes on investing in fundamentally sound companies when the market had turned against them.
The market is now declaring Android as the big mover yet LG, Samsung and Motorola mobile divisions are still losing money. HTC which is a profitable company has seen their margins steadily decrease(last quarter stood at 29.7%) as they have to impress their fans with the latest fans while sacrificing pricing and the ability to deliver devices(part of the paradox Mr. Balsillie referenced above).
Now many of these manufacturers are going to be competing with their own products as they release Windows 7 devices under the same conditions that saw them lose billions on previous WinMo OS platforms. Yet these companies that lost money and momentum in this space are now being heralded as victors against a company that has no debt and is increasing revenues and profits.
And when did everyone forget that Gardner,IDC and other research firms have changed their calculations of market share depending on what clients have paid them? And let’s not forget this gem by Gartner from October 2006;
“Increasing component costs and pressure to cut its prices mean Apple’s best bet for long-term success is to quit the hardware business and license the Mac to Dell, analyst firm Gartner claimed on Tuesday.”
So let’s put a brake on the predictions of research firms.
RIM is constantly portrayed as being in trouble, yet the only company that has better fundamentals is Apple. A company that has been in business for two decades longer than RIM.
RIM is up over 2% this morning already. Is your general outlook on RIM bad or do you just really not like the BlackBerry Torch?
My general Outlook is “concerned”. RIM continues to sell a lot of BlackBerry devices to people who already have them and they appear to being doing quite well overseas, especially with their lower end units.
This post, however, was more about my belief, one shared by many, that the BlackBerry Torch is underpowered and underwhelming as a high end smartphone compared to its competitors and isn’t all that appealing to net new consumers. I’ve said on several occasions that the Torch may be the best BlackBerry ever when compared to other BlackBerry devices but just an OK / mid-range device when compared to its competition…
just keep following the herd…and by the way, thank you for the 12% I’ve made over the last week…
Not following the heard… Just happen to agree with a lot of people who share concern about RIM.
As far as RIM being up 12% this week, don’t thank me, but please, leave a comment next time you see a spike like this coming. I didn’t buy until Wednesday, so, I am up only about 7% and on a relatively small amount of shares (really just protection to the upside from my recent shorts) because I really couldn’t call where RIM’s earnings report was going to be this week.
By the by: This post is about what I think about the Torch, not my stance on RIM…
Did you actually read the first sentence? It sounds almost you are trying make a disagreement where there really isn’t one…
How come if I bash RIM you guys call me a troll but if the Rimarkable one does it, he is just giving his opinion and showing concern? You know that the lackberry is dying if fanboys like Rob are jumping ship…
I am going go out on a limb and guess that it is because you call BlackBerries LackBerries, usually make ridiculous statements not based in reality or even sound opinion, and are generally antagonistic towards everyone who doesn’t agree with you…
I agree with a lot of what Robb said in the posting. I think we’re going to see RIM’s market share in the U.S. slip significantly in the next few months unless the cheap low end Blackberries like the Curve and/or cheap BB plans from MetroPCS, Virgin Mobile and Boost Mobile make up for the lost subscribers from the major carriers like Verizon, AT&T, Sprint and T-Mobile.
On another note I thought I was going to miss my Storm2 after I got a Droid X to try out and I still haven’t gone back to my Storm2. I know 8 friends and cowokers who have switched from Blackberries to other devices, 7 went to Android phones and the other 1 went to an iPhone. This is just anecdotal evidence but if this trend continues RIM will be in a lot of trouble.
Well said. Finally somebody with a clear perspective and conscious.
I live outside the USA, where we’re still waiting for the BlackBerry Torch, and I think it’s useful to examine the life story of the BlackBerry Torch and the BlackBerry Bold, and compare the differences.
The Bold first launched in Canada through Rogers and the UK through O2, who were traditionally amongst the first carriers to ship new devices. The US Bold release through AT&T was infamously delayed for months. The device was a hit, and remains a high-water mark for RIM. It drove uptake of HSDPA on mobile devices in Australia.
The Torch has clearly been designed to AT&T specification. I’m guessing the requirement was ‘give me a BlackBerry with iPhone feel’. It’s not so much a RIM device as a AT&T device, in the same way as the Storm was a Verizon/Vodafone device; not a RIM device.
I doubt there’s anyone more aware than Jim Balsillie of how technically far ahead of the Torch some of the Android and iOS devices are, but RIM had to deliver a product for AT&T, and as far as a first-up effort goes, it’s pretty good.
Expect the next generation of BlackBerry6 devices (where RIM runs the design workshop) will have the faster processor and higher res screens that some of the Android and iOS4 devices have. And we know that the phone antenna will work, and the security will be BlackBerry-grade, and all the other things we expect in BlackBerry will be delivered, but with a webkit browser.
I agree with all that is said. Users don’t give a rip about the “paradox” or whatever that dumb CEO thinks… My Storm2 takes forever to load PDF’s from mail and forever to load web pages… That’s not saving bandwidth, that is frustrating me to not use my phone…. Thus saving bandwidth, I guess…. Bad way to go about it if you ask me.
As long as the carriers can handle the traffic and people buy droids and iphones RIM looses out on a key market segment.
Users require unlimited storage for Apps… RIM throw away your kernel and replace it with QNX that you bought. It is obvious that there is something wrong under the hood, otherwise you would have allowed us to install apps on our media card ages ago. And if anyone says “RIM won’t allow for app storage on memory cards for security reasons” I WILL PROMPTLY SLAP YOU. That is the stupidest reasoning I have ever heard. Consumers require 8GB or more for Apps. Even if it is for security then throw in a IT Policy for BES servers. Or allow us to use the wasted extra internal memory (like 2GB for Storm2)… Whatever it is DO IT NOW! For the people that say “well no app would need more than 4 MB” you are dumb. Why would a game company write a 250 MB app if no BlackBerry can install it? And RIM you are idiots for giving the archiving feature in App World. That is one of the dumbest features known to man. It’s like you are admitting there is a problem with your underlining OS yet you do nothing, and come up with reasoning behind CRAP.
Next up is the CPU… This is an easy one RIM… Come on, throw in a faster CPU. Will battery life suffer? Yes but as long as you match the Droid and iPhone battery life no one will care. Sell the Curve and Bold for lower end smartphone users who care.
Next up is the screen resolution. You must match the droid and iphone on this one. I know it’s going to be a pain to write a proper app screen re-sizer… But I am sure you can come up with something. I know you don’t want to RIM… But you MUST!
All your phones MUST have OpenGL support. You are making developers think twice when you don’t have OpenGL for the Torch… I think when the Storm2 and Curve2 came out developers were like “alright, looks like RIM is now going to have OpenGL I guess we can start planning a port”… But then you ruined it with the Torch… Any hopes of more OpenGL games from developers were shattered by the Torch… Man, does RIM understand this? COME ON!
Also RIM you must come up with a WYSIWYG UI designer for developers. I know you demo’d one. But you MUST get it out ASAP!
I congratulate RIM for fixing the browser… But without the above they will not capture the high end segment. FYI – Tablet users are all in the high end segment. If your tablet does not meet or exceeds the iPad please don’t release it.
One more thing… NO ONE CARES ABOUT “The core BlackBerry aspects are well defended and looked after and protected.”
As a high end phone you suck RIM…. What the heck is core BlackBerry aspects? PUSH Email? Ok fine keep that around… But slow crappy UI with no memory and terrible resolutions have NOTHING to do with “Core BlackBerry aspects”… At least not ones that should be kept around! And great, you have awesome battery life but can only really do email…. Great!
What frustrates me about RIM is the things that are killing the high end market are fixable, and they could do it. They have the money, and with QNX they now have the technology at their finger-tips… So internally I think there is a desire to fix the platform for the high end… But then those dumb CO-CEOS come out and say stupid words like “trans-formative experience” and “super apps” and crap that no one cares about!
I think it is clear the co-ceos must go and new leadership must be put into place. Otherwise Android will take over the market and say goodbye to RIM…. Because corporations are willing to switch to ActiveSync because the folks at the top of the company will force them to. Security does not matter if you can’t do the things needed on a smartphone. RIM you are going down if you keep those two ceos.
The Blackberry is the past.
I am typing this from my blackberry torch… And I wish that wasn’t the case. I am beyond dissapointed with this device. It lags on almost every action, takes up to hours sometimes to realize some of my text messages are already “read”, and hangs when I try to unlock it just to use it. Unfortunately the AT&T store gave it to me for $99 so I feel like I can’t complain too much for having such a cheap phone, but I should have gone with one of the more capable android phones. (Iphone 4 was not on my shopping list since I needed a phone and couldn’t wait for the backorder). Needless to say I have only had the phone for 3 weeks, and its just depressing. I guess I was spoiled the fast screen switching and touch response from the iphone 3g. The torch doesn’t hold a candle. I’m hoping that some of these issues can be fixed with an update but I may just have to deal with the restocking fee of returning this piece of crap.u
Is always easier “destroy” to create and if the HERD (not heard) Robb are shorting is easy and for me you end they are speculators not investors.
In a long way I will see RIMM in a 120 (no more than 3 years).
I dont get whats so hard to stay up to the competition, as a very busy business owner I commend Blackberry for being a great phone, great for multiple calls,email an amazing battery life! But that the problem that all is does no good apps or resolution nothing for leisure, only work driven, what about if you want to have a little fun.
I you cant beat them join them. So join the competition and upgrade that phone I know you can do, I think that we should see the Torch 2 very soon…..