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Looking Ahead to Research In Motions’s Q3 Report Tonight

RIMM Stock Talk
By Chris Umiastowski on 15 Dec 2011 12:21 pm EST
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After the market closes this afternoon, RIM will publish its financial results for Q3 of its Fiscal 2012 year. For non-financial types, remember RIM's fiscal year ends in February.

It was only two weeks ago when RIM dropped its latest bomb. No, I'm not talking about the inventory write off. As I explained in my last article, the bigger issue is about the market demand for BlackBerry 7 devices.

RIM guided the Street to expect lower Q4 handset shipments versus the current quarter. I was surprised by this despite plenty of criticism about how I should have seen it coming. I thought BlackBerry 7 would be more than a very short term band-aid. I thought it would give RIM a few more months to get their act together on BBX (er ... make that BlackBerry 10).

In Q3, RIM sold only shipped 10.6 million handsets, but customers actually bought 13.7 million. The former number is about inventory balancing at carriers and distributors. The latter figure is what actually matters when evaluating the business. It tells us what customers are doing. But the sell-in number (handset shipments) should also be an indicator of future expectations, right?

Last quarter, RIM guided to 13.5 to 14.5 million shipments in Q3. And based on the December 2nd disaster-revealing press release, they hit that range. They sold about 14.1 million units into their sales channels. We don't know how many were actually sold to customers. We'll have to wait for tonight's call to find out.

However, they dropped a pretty huge hint that we won't be pleased. The told us that Q4 shipments will be lower than Q3 shipments. The only potential for this to turn into a good news story is if carriers are bleeding BlackBerry inventory to very thin levels in advance of QNX-powered handsets. But we've already seen the BlackBerry 10 roadmap here on CrackBerry and it doesn't look like there are enough devices coming fast enough to justify bleeding channel inventory. So it must mean that sales are just not very strong.

Let's assume that RIM actually sold something like 14 million devices to end customers in Q3. For comparison, Apple shipped 17.1 million iPhones in its latest quarter. Oh, and they also shipped 11.2 million iPads. Those are shipment numbers, not sell-through numbers, but they still paint a very clear picture. Apple is whopping RIM's ass at the high end.

As part of RIM's early December warning they also told us Q3 revenue (that's the quarter they'll be reporting tonight, remember) will be lighter than expected despite meeting shipment guidance. Why? Because of "mix". This means less sales of high end devices and more sales of lower-end Curves.

At the low end of the market RIM has been really successful. Especially in places like Indonesia, Latin America, and Africa. BBM is a big part of this success. But Android activations are around 550,000 per day (according to Google). That's almost 50 million devices per quarter compared to RIM's 14 million and Apple's 17 million.

The battle for the low end of the market is only getting more difficult, even in the United States. Amazon's Kindle Fire is an Android tablet sold pretty much at cost. Amazon has a powerful media and e-commerce strategy to justify selling devices at break-even (or a slight loss). RIM doesn't. And most experts expect Amazon to enter the smartphone space in 2012. Does RIM even have a strategy to deal with this? Or are they in denial as they were several years ago when the iPhone came out?

Tonight's conference call should be interesting. We're going to be live blogging the call, so join us. RIM has an unbelievable number of challenges facing it, and investors need to hear something better than "Just wait and see". In fact, anything other than concrete details coming out of the mouth of Jim Balsillie are likely to ignored, if not ridiculed by frustrated investors and analysts. And that's not a criticism - it's simply the truth with respect to how the investor community seems to feel about his delivery on promises.

We need to hear specifics about when BlackBerry 10 will hit the market. RIM has repeatedly said early 2012. If that's true, then we should be seeing devices launch prior to the next conference call in March 2012. So if RIM won't talk about details on tonight's call, we have to assume things are again falling behind schedule.

I think there is also a huge question around the company's strategy. Is it enough to just be a good hardware vendor with a slick OS? Or do you need a more power with a media strategy (like Apple) and e-commerce (like Amazon)?

But that's a topic for another article.

See you on the Q3 results live blog tonight.

Disclosures: I own shares of RIM, Apple and Google.

Chris Umiastowski is the co-host of Stock Talk, a Mobile Nations podcast. You can follow Chris on twitter at @cumiastowski and read more posts by Chris at ChrisUmiastowski.com.

Reader comments

Looking Ahead to Research In Motions’s Q3 Report Tonight

41 Comments

it can't be that bad!

Figure for arguments sake you can own two shares for $40. That sounds like a cheap bar night in Toronto.

I agree with you. With all the bad press recently, RIM needs to tell us when to expect our first BB10 phones. When GM was in bankruptcy (or about to go in) people stopped buying because they didn't want to be caught with a car and no backup. Well its the same for BB but a little different. People are hearing nothing but bad press about RIM and there demise, leading to people being weary about buying them as a phone and then not having a signal in 2 months.

RIM needs to start advertising its phones, they FAIL at marketing. Its really disgusting that the person running PR is still around. They need to show off the advancements like NFC, mobile hotspot etc. They need to go to old blackberry users and get to upgrade to a new phone and they need to switch over android users. In my mind, android being so new and pumping out so many phones, they're customers aren't loyal like BB or apple. They can be easily won over.

I must say tho, the google nexus's panoramic camera function is sweet and it would be great to see that in a BB device.

LOL

I had to, when I read "they need to show off the advancements like NFC, mobile hotspot etc."

It's so emparressing that even now there is no official mobile hotspot and even when 7.1 is official you need the aproval/service books of your carrier.

As I'm stuck in waiting to get the 7.1 and mobile hotspot/info from my carrier (and a few other things) I really starting to see the wrong decision I made when I bought the 9900 in September when my old BB went to BB-Heaven.

Even a 100€ Android with phys. keyboard (but not a kapa touch) has moible hotspot, and skype/sip client. (of course there is no boldlike hardware there, only low budget)

"If a tree falls in a forest and no one is around to hear it, does it make a sound?" is a philosophical thought experiment that raises questions regarding observation and knowledge of reality. http://en.wikipedia.org/wiki/If_a_tree_falls_in_a_forest I couldn't agree with you more that they need to fire everyone in pr, marketing, advertising.When are they going to realize they have to sell their products? Cellcom Empoloyee

I just got more shairs at $16 maybe I should waited till tomorrow. Come one good news.
Love my 9900 and playbook

It's very clear that the stock is undervalued right now (I bought under $17 last week myself). Even as a takeover target it's worth above $25.

My buy was speculative, but I consider it informed speculation. I'm betting that they're getting their collective act together, and that announcing the PBOS 2.0 update for February was evidence that they're actually trying to set targets they can actually MEET.

I believe in the PB as a device. I think Android compatibility will make it much more appealing to consumers, and I believe that Android apps in BB10 phones will make them attractive, too.

My fingers are crossed...

Dubstep Nation, there are drops, but after that, it's just pure exctasy! By the way, I think this is great, RIM has been all high expectations and going under, I think this under BS they are talking about is so they can go high and get some good media.

Analysts should just give low estimates all the time so RIM can easily beat it. I analyze that shipments to be 2million and revenue 1 billion. Then everyone would be like OMG they actually shipped 10 million units!! Then shares would go and and media would shut up.

End of rant.

That is mind boggling in it's ridiculousness.
It's like telling yourself you only make $2.00 a week, then getting super excited when your paycheck is more.

Guidance is going to be pretty ugly and I don't expect RIM to give any clear guidance on BB10 devices. They have the parts needed to make the transition but are having problems executing. The first sign of trouble was when they were going to "meld" BBOS and QNX together, that suggests that too many in the company are trying to cling to an OS that has fallen out of favour with the US marketplace.

A transition needs a clean break. They can't try to support two OS for an extended period of time.

you clearly don't understand how to take care of customers.

My invoicing system is DOS-based. If MicroSoft didn't still support DOS-based software, I wouldn't be upgrading my computers here regularly.

MicroSoft still take their entire legacy users into account after all this time. I'm looking at upgrading again, this time to Windows 7 or possibly waiting for the next big thing. In either caes, I know Microsoft will take care of me.

Same with RIM. They will continue to consider their legacy while looking forward to the future.

Chris U

Hope you will be doing a write up on the call tonight. The writeup after the last conference call brought out some things I overlooked.

I truly believe that much of RIM's problrms with the OS7 deviced relates to lack of slick marketing. The new Bold is a fantastic device. The problem is the average consumer doesn't know much about BB. How can they with all the Apple marketing. If RIM effectively marketed the OS7 devices they would be a success.

RIM basically has no real marketing from what I'm seeing lately. How can a co-CEO run marketing? They had a good marketing guy. They lost Keith because he understood emotional-based marketing and RIM did not.

I think you are right (I have the 9930) but man it just bends the mind to think that they JUST DON'T GET IT! Truly shocking.

I really wonder about the corporate board at RIM. I mean I can see that it's hard for the CEOs to let go, but the board of RIM is MIA. If I held stock I'd be apoplectic.

It's not just bad marketing, it's incompetence.
Shockingly, I know from a friend that the Torch 9810 (Torch 2) is *still* not yet launched in Hong Kong as of mid-Dec 2011 !!!

So does RIM expect their loyal customers to be shepherded like sheep, go out and buy that outdated Torch 9800 (Torch 1), knowing that it's already antiquated?

Also, the Torch 9850 full screen keyboardless model was just launched last week in Hong Kong (1st week of Dec'2011), from what I've heard many stores don't have the actual phone to show its customers yet (just dummy non-functional model).

Both above models were part of RIM's "biggest global launch ever" back in August 2011, yet still unavailable and cannot buy now that it's mid-Dec 2011 ???

So RIM needs more sales of its BlackBerry OS7 models, and yet some models are not yet available (or just launched) here in Asia? I for one don't understand what RIM is thinking. RIM really needs to get its act together for sales in Asia, for which it claims to be still a breadwinner for RIM.

The issues you report are going to be down to the particular carriers in Hong Kong and is very much not the case in other parts of Asia as seen by Indonesia being the first country to launch the 9790.

The biggest launch thing was true based on the number of countries and carriers they claimed, but they made no claims about guaranteeing every carrier in the world would launch these devices.

At times it is all too easy to bash RIM for stuff when sometimes the issue is not down to them.

RIM did not even bother to offer potential customers the option to outright buy Torch 9810 or 9850 (with no carrier mobile plans).

And with 4+ months carrier delays for Hong Kong, loyal BlackBerry fans simply cannot buy the Torch 9810 at all.
What a way to keep your BlackBerry customers loyal to your brand. (sarcasm).

I've heard there are at least 6 major mobile carriers in Hong Kong, so a 4+ month delay in launching Torch 9810 and Torch 9850 speaks volumes of the relationship between RIM and Hong Kong based carriers (or the lack thereof).

May I quote Bloomberg on 15-Dec-2011, "...Total BlackBerry shipments this quarter will be about 11 million to 12 million, RIM said. Analysts had projected 12.8 million units, according to Bloomberg data. ..."

Therefore RIM is trying hard to increase its sales, while certain Asian markets still lack key models 4-5 months, and loyal BlackBerry fans cannot buy the model that they want. Does RIM seriously believe that loyal customers would forever remain loyal to BlackBerry with this kind of treatment?

FYI, my friend ended up buying an iPh*ne4, because he needed handwriting input for Asian characters. The touchscreen Bold 9900 does not have handwriting input !!
Go figure...

Finally, I personally would *love* to be able to pay for my underground train ride using Bold 9900's NFC capability! (Currently in HK, the underground uses the "Octopus" contactless payment system, similar to that of the "Oyster" system for the UK).

Don't get me wrong, I'm still pulling for RIM, but RIM's (in)action is stretching even loyal BlackBerry users' patience terribly thin...

As an executive sales professional for many years, I just don't know how RIM can expect to get on top without "getting out there" IE: Marketing! I love my BB but man oh man. I can count on one hand how many times I have ever seen BB commercials or radio ads. And I can't count how many apple ads...and I admit, they are damn good ones.

It's sales and business 101, How do you expect anyone to know about you if you don't get out there? The end.

My first ever crackberry post. I love my 9780. I've got a playbook at the best price that will ever be possible, and I trust that the hardware, and privacy mandate from blackberry is going to be what carries RIM through all of this, coming out the other side of this stronger from it all.

I don't know a single person that hates their blackberry. I only get positive feedback in my experience. I would only be scared if the hardware, programming, and privacy took a huge hit.

As for the Ipad, I'm not one of those guys that wishes he had 10 inches (in a tablet) when 7 inches has always gotten him in the game.

I totally agree.....rarely...if ever have I seen an ad on tv or in print for Blackberry.
Some people scoffed at the fact the playbook was being sold on the shopping channel the other night.....but I have to say....those 9 - one half hour segments made many views sit up and take notice......the sale of approx. 3,000 units in one 'showstopper' speaks for itself.

Marketing is the key......not yet another phone release.....just think about it - how many different types of Blackberry phones can there be right now and how many do we really need??? Very confusing.

You know when an Iphone is out or a new Droid...but at the same time it because they boast features.

For Blackberry though you line up its phones and all you see its the same phone with a diffrent number...good luck making great Ads out of that.

RIP RIM

Go somewhere like Mexico and you will see them.. It's like they completely gave up in the US/EU, etc...

Have to laugh at parts of this analysis. "Apple is whooping RIM's ass at the high end" Apple aint whopping no one, Android is doing the whooping and Android is the OS that RIM has to worry about not Apple. Android produces hand-sets up and down the lin and the Android OS is the biggest threat to RIM in terms of corporate. iPhone will never be a serious corporate alternative to BB simply because it prices the iPhone too high to attract companies to buy thousands of handsets for their workers.

I'd even say windows phone is more of a threat than Apple because I can see corporates moving to appropriately priced windows phones before they move to the high-priced iPhone model.

I think BB is very much a dead brand in the US. I thikn no matter how good the BB10 phones are people will not want them.

BTW no droid boy here. BB9930 and will buy the new phones but just know that very few others will, at least in the USA.

I know how shallow this sounds, but the mocked-up handsets we've seen so far ("London" and "Milan") don't look like anything else out there. Looks alone will at least grab a little attention.

If they turn out to be good hardware as well, there's some potential.

Forget marketing.

First, RIM need to stop selling low-end outdated phones alongside current models.

You cannot expect people to be wowed by a BlackBerry when you have just bought a Curve 8520. An outdated phone, outdated OS and poor spec. THIS is why people bash BlackBerry phones - because these are still around and still currernt. BlackBerry users might defend arguments by saying that the comparisons are to old phones, but they are not really, are they?

The BlackBerry legacy is its undoing unfortunately. I'm optimistic about the bbx phones, at least there is FINALLY something different about them.

Good hardware does nothing if you have:
1 - No public awareness of said products or what they are good for or even basic positive marketing
2 - no software to support said hardware

Dear Liqued_Revolver everyone as a right to be stupid but please don't abuse it, Look I know you can't educate pork but think about what you say. First you say all blackberries are the same? funny last time I looked they had touch screen only, slider with touch screen, slider without touch screen, keyboard without touchscreen, keyboard with touch screen and a flip phone, Android have a slider and a touchscreen and Apple have an iphone. Now regarding features the latest advert for the iphone should read like this. Come on you Apple fan boys upgade to the latest iphone that looks identical to the last iphone but don't worry folks we have included Beta software for you to test for us free. Also and this applies to android as well we have included at no extra cost, tracking software completely free of charge. We do need to track you people incase you fall and hurt youself.

Anyone that thought OS7 phones would do more than provide a slight bump is sales during Q3 didn't have their eyes on the road.

Many better, more advanced phones came onto the market at the same time RIM was releasing a warmed over and tired OS on a faster phone. Most of the new phones release time periods were already known. Nice phones for the BB user, not near enough to turn things around or even provide
a sustained growth period.

To many right offs, lawyers fees,R/D costs are still probably high along with internal upgrade costs and the recent outage provided an even larger cost center they must handle.

RIM still has cash and good income (I hope) and can survive for a while.

All this combined with the BBX abortion and the other RIM generated bad press have severely hurt RIMs sales/stock/reputation. To think anything else would happen in Q3 and Q4 2011, is again misguided and wrong.

I am not a hater, trust me.

With each passing month the hope I have for RIM gets dimmer and dimmer.

When will they understand that Mike and Jim need to be held accountable for their companies free fall into smart phone he11!

More importantly they need some great, talented and fresh people to breath life back into BB.

Tim

I totally agree with everything you said. Your assessment is very even handed.

I am not a Rim hater either, but things need to change. Mike and Jim should be held accountable for their lack of vision, and heads need to be rolling.

I am sure things will be changing really soon. People are not going to sit on their hands for much longer.