Armchair analysis of BlackBerry Jam Americas 2012 and Research In Motion earnings preview

80 Million Subscribers
By Chris Umiastowski on 27 Sep 2012 02:07 pm EDT
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This year is a first for me. I've attended every single BlackBerry developer's conference, held annually in California, since DevCon started several years ago. But not this year. I ran into a schedule conflict and had to make a decision. So here I am, back at home, catching up on the keynote videos and reading everything I can to understand stakeholder reactions to the show.

It's an interesting week, that's for sure. The stock hit yet another low on the back of the iPhone 5 release, which happened to coincide with an ill-timed BIS quality of service issue (it wasn't an "outage" - all data got through just fine... things we're just delayed for a bit). This all happened ahead of the BlackBerry Jam keynote, which is now over. And following this we'll soon see RIM announce quarterly results in just a few hours.

The most important financially-related information came on Tuesday during Thorsten Heins' portion of the keynote. He revealed that RIM now has 80 million BlackBerry subscribers. This surprised the investment community, who (on average) expected the user base to decline from the 78 million subscriber base last quarter. So despite RIM's numerous delays with launching BlackBerry 10, and well known loss of market share in the US market, they're actually still seeing growth.

Think about it. 2 million new subscribers per quarter is over 10% annual growth. Not too shabby for a company who isn't currently competing at the high end of the market. It clearly shows that customers in emerging markets are still actively buying BlackBerry handhelds. This is very encouraging, and I think it gives RIM a better chance at global recovery when BlackBerry 10 launches in a few months.

Other than this, the keynote itself is being viewed as a bust to Wall Street. That's because investors don't really understand developers, and don't care for all of the SDK and UI demos that RIM showed off. Psychologically, these come off as "catch up" events to the market and don't impress anyone. But they do matter. They are required for RIM to regain market share in 2013. Ignore anyone who tells you that RIM hasn't stepped up its game. They're clueless. It's sad, but true.

It's also important to keep in mind that the number of people who will complain in public far outweighs the number of people who will give public kudos to a company. Just look at the Twitter and blogosphere response to RIM's developer appreciation video, featuring an REO Speedwagon parody. It's almost insane to witness just how many people are complaining about this hilarious video, either believing it to be an "official" marketing campaign or not realizing that RIM has done this before (Orlando in May - the infamous Tom Petty parody, which was never posted to YouTube). RIM is taking its recover seriously, but not letting that get in the way of having some fun while they're at it.

I'm quite happy with what I'm seeing, but I will lay out a caveat. RIM better not be exaggerating. For example, during the keynote Marty Mallick said (paraphrasing) that all of the big names we'd expect in App World will be there at launch. If they're going to say something this strong, they better not launch without apps like Netflix and Skype. How can we take them seriously otherwise?

BlackBerry Peak, Flow, and Hub look fantastic. The SDK improvements (including Cascades) look powerful. HTML5 performance looks great as does the BlackBerry 10 web browser. Developer support is improving, and the BlackBerry $10,000 revenue guarantee is certainly drawing even more developers to the platform. The timing of BlackBerry 10 release looks much more certain. Everything is going in the right direction. They've come very far in the last 12 months, despite not actually launching the product yet.

We still have to get through at least another couple of horrible sets of financial results. Today will be the next set of bad numbers. But the good news is that the future of the company has nothing to do with the numbers they'll be reporting. I think the most important number will be the company's cash balance. Last quarter they had a kitty of $2.2 billion. If they can hold this steady, the market might cut them a bit of slack.

We'll find out. I'm tied up today and Adam and Bla1ze are on their flights home from BBJAM, but Kevin will be firing up the press release as soon as it hits as well as a live blog for the community to chat during the Earnings Webcast. We'll follow up with more analysis and a full out CrackBerry podcast soon. 

Reader comments

Armchair analysis of BlackBerry Jam Americas 2012 and Research In Motion earnings preview

21 Comments

if they market the hell out of the hub to the consumer market, it (the hub) could be enough to pique people's curiosity...

finally a true speak everyones so caught up in such petty things but the real big picture is RIM is trying and trying very hard. I hear so much from my own fam for being a BlackBerry supporter and lover of the product that imma just get an iphone/galaxy and bb doesnt get it.... ill informed of all the work they are doing and the commitment they have made to all the developers is insane...

the fact that they garuntee you 10k with your app if it fits a few small standards is amazing they also had it in the keynote dont just build an app to build it... the app properly built will make you the money you desire.

All i know is ive never been as pumped about anything as i am for BlackBerry 10 i never imagined they would show off as much as they did and yet its just the tip of the iceburge i am eagerly waiting for the device and got 2 already ready to be purchased 1 touch and 1 kb i cant decide so im getting both lol one for personal other through my company,

BlackBerry By Choice for now and forever

I really appreciate all your articles Umi. I'm no financial guru but you make everything very easy to understand for us average Joes. My expectations for this conference were very low so I was pretty impressive with everything RIM showed off this week.

There are still BlackBerry Jam Europe and Asia coming in 2013..

Seeing that BlackBerry is stronger in EMEA and APAC, it's a no brainer that BB10 will be announced there.

Brace yourself..

BB 10 is definitely the key to RIM's success in the future. Strongly agree with the financial results piece - the fact that they are a peek into the past is how they should be viewed. Another key piece would be what RIM considers "important" from an app stand point.

While a FB or a Twitter might make my list of "important" apps, a lot of folks would want "skype" & "netflix". I hope that RIM is adopting a model where they are reviewing the apps based on the usage or downloads & then classifying them under the "important" category.

All in, I am definitely looking forward to the BB 10 devices. Have always been biased towards a keyboard device, but going by the videos & the posts, I think I will side with an all touch this time round.

- VHD

during the keynote Marty Mallick said (paraphrasing) that all of the big names we'd expect in App World will be there at launch. If they're going to say something this strong, they better not launch without apps like Netflix and Skype. How can we take them seriously otherwise?

AMEN to that. I personally think Netflix isnt that important (it should be available for playbok though) but for sure Skype and Instagram (even though I'd personally wont use it) have to be there.

Thosten had to accomplish a couple of very basic things:

1. Be DEFINITIVE about BB 10 coming out in Q1 2013 - Was He?
2. Mention that the "App Names You Expect" - Name Them - Did He?
3. Show that RIMM is changing it's way, regarding, being LATE - How many of you are enjoying Playbook 2.1 OS that was promised this past summer?

There were some very nice features on BB 10, to be sure, but RIMM is struggling with a credibility issue.

The 2 million extra subsribers was a nice "unexpected nugget" during BB Jam - let's hope they kept some powder dry for this evening....

"How many of you are enjoying Playbook 2.1 OS that was promised this past summer?"

Where exactly was this "promised" by RIM? I might have missed something, but I don't remember RIM even saying anything about 2.1.

What I do remember is an alleged date by a "trusted leak". Not the same as a "promise" from RIM.

I don't disagree that they need credibility. I don't disagree that they need to keep promised.

Just not sure they broke this one if they didn't make it in the first place ...

Umi,

Thanks for the article.

Why are we still defining success of BB10 apps based on Skype and Netflix. There are many alternatives out there with some are even better quality. Would you say Netflix is a number one provider for new movies?

There is a PlayBook app called ComWave ePhone. You can call 57 countries @ $.01/minute. You can do conference calls etc.

I think a lot of people are not aware that they can get a 7" LTE Playbook phablet. Add ComWave to the 7" LTE Playbook! It beats the 5.5" Note II.

Beavertail2, I agree with what you are saying, there might be better apps that can do the job with a better quality, but that does not mean they should not concentrate on apps like Skype and Netflix.

They might not be the best apps, but the majority of the people dont know that, and this is what they want, so why not give it to them.

All my fiends use Skype, eventho I have proved to them that there are better apps, but that wont change anything to them, they still want to use Skype, so we should give it to them.
So BB10 must have video chat and Skype, and it will make a difference.

PS: I have a PB and never knew about the app ComWave ePhone, so thanks about that, I'm definitely giving it a try.

For Netflix and Skype to be converted there would have to be a valid commercial reasons for those two companies to convert their software.

Also, there would have to be carrier agreement to allow the apps on the devices.

I doubt either is a foregone conclusion based on our experiences to date.

However, with BBM video and the video store offering it's hard to see what benefit there is with either Skype or Netflix. Phone numbers are about to become a historical relic.

Given the choice I'd rather not use either - they're unreliable. Not to mention the fact Netflix content isn't exactly stellar.

In the end isn't the best thing that RIM can do is take this off the table and give the faithful what they have been asking for? From Thorstein to Frank to Alec and on down they have all mentioned at times that this read this, and probably other blogs so they know what the complaints of the faithful are.

They say "we" the faithful will be a big part of the marketing for BB10. They have to get this fixed, and IMHO the sooner the better and let us all know - in order to get those with any doubts (like me after the PlayBook experience) back on board.

You need to remember that RIM can't make the skype and netflix apps. It's up to the developers/companies to make the app. Don't blame RIM for it.

Not sure I agree. I like the video app, but it only works with BlackBerrys (only PlayBooks right now). Skype crosses platform and has a lot more users. Even iOS users I know typically use Skype over Facetime because it crosses.

Netflix seems less important to me personally on a phone (data plan would be too expensive). I'd rather have it on my PlayBook that I can plug into a TV though.

Just saw a brief report about RIM on BNN with an interview with a financial company from San Francisco. Basically, when they mentioned the 10K commitment to developers, these guys broke out laughing (calling it "developer bribery"). The finance rep said most developers don't really care about that. I'm not part of the developer community, so I'm curious what the overall consensus is over there on the 10K and on BB10 overall. How many new developers have jumped on board so far?

~I am BlackBerry by choice~

CASH IS KING!

Operating Cash Flow will be the key item to look out for on today's earnings release. The future of RIM is highly dependant on the release of BlackBerry 10 which requires cash.

RIM's CFO said last earnings call that he expects cash level to be at similar levels to Q1 which is approx $2.2B of cash on their balance sheet.

It is definitely positive that the subscriber base is increasing, and I agree with Chris Umi that this is mainly coming from emerging markets where smartphone adoption is increasing. But you also have to look at the fact that in these emerging markets, consumers are not buying a $500 BlackBerry Bold; they are buying a $200 BlackBerry Curve. Consumers are not signing up for a $50/month data plan, they are sigining up for a $15 Data (which includes social apps like Twitter, FaceBook, and Email). What does this mean? ARPU is decreasing.

ARPU IS DECREASING!

Average Revenue Per User is decreasing for RIM. This is mainly driven by what I said up top, expansing in emerging markets where lower margin products are sold (Hardware and Software). In addition to carriers in developed markets putting pressure on prices of BlackBerry services. I believe that not only are margins decreasing on the hardware side for RIM but they are also decreasing on the services side of RIM.

Put this together, and this means less revenue and less income.

As every quarter, follow me on Twitter for my extensive analysis, thoughts and comments on today's earnings and details from the call.

Twitter: @SurrealCivic
http://www.twitter.com/SurrealCivic

doesn't is suck to be wrong on all accounts. revenue is up, subscriber base is up,EPS was way better than predicted. don't quit your day job dude, your gonna need it.

After this article was posted the RIMM US stock was down 1.5% (FYI FB was down 1.66% :)
With recent outages, this was predicted. There are still (said to be) 78 million BB users worldwide. Phone sales is not everything. RIMM model is service, and phone sales is the way to give service.

Investors want long range opportunities. If OS10 comes out with minimally the same elements as demo'd, RIMM stock must go up ... perhaps double within the first quarter after phone release.

BB owners tend to keep their phone for a long time, whereas iPhone and Galaxy owner want the latest wiz-bang; people turn over their phones every two years when the phone companies give subsidized phones (paid for by exorbitant monthly charges).
BB owners often have relatively low monthly charges (For example: many TM US users have BB monthly charges with unlimited internet and email @about $19.month).