Back in Black!

Over the last week I've spent a fair bit of time reading and digesting the thoughts in various bullish and bearish analyst reports on Research In Motion. I noticed that most analysts seemed to be estimated BlackBerry 10 hardware to sell for about $400. This figure, known in the industry as ASP (Average Selling Price) is the price device manufacturers sell to operators at.  It is NOT the retail price you pay for an unlocked phone.

RIM's current portfolio ASP is just under $229, and the average device cost is actually closer to $240-250, so they're losing money on hardware. Keep in mind this cost calculation fully absorbs all costs that RIM must account for in reporting numbers. It's not just a bill of materials as given in a teardown analysis.

Anyway, I had a hard time believing that RIM would actually sell BlackBerry 10 hardware for only $400, and I was fairly vocal about it on a few blog posts. Then we saw at least one analyst publicly estimate a $450 ASP.  

Since then, I've come across two data points to support the idea that a $400 ASP for BlackBerry 10 is totally out to lunch.

Point 1: The BlackBerry Bold 9900 has an ASP, in the UK market, close to £280, which translates to over $440 USD.  If the current (and quite old) high end device from RIM can sell at that price point, it seems absurd to believe BlackBerry 10 would sell for less.

Point 2: Another European data point suggests that one major (and I do mean major) operator intends to sell the devices for €450, which equates to about $587.  Keep in mind this retail pricing usually represents a markup over the device ASP, meaning carriers make a profit on selling off-contract phones.  

As we come across more data, it should be fun to discuss it in blog posts and in the forums. But I'm pretty confident in saying that RIM should be making healthy profits on BlackBerry 10 hardware.  

There are still plenty of unknowns. We don't really know what RIM's cost will be (hence gross margin).  We don't  know what percentage of sales will migrate to BB10 in the first few quarters.  We don't know what they plan to do later in 2013 to propagate BlackBerry 10 towards the lower end of the portfolio, nor what the price points and profit will be like on those devices.  We don't know how service revenues will change over the next few quarters.  

We'll keep digging.