QUOTE AND NEWS
Benzinga  Nov 23  Comment 
BlackBerry Ltd (NASDAQ: BBRY) shares rose mysteriously on Friday, presumably on renewed anticipation of a possible buyout. Contrary to reports that Apple Inc. (NASDAQ: AAPL) will close Beats Music, the iPhone maker might have a plan to save the...
Benzinga  Nov 21  Comment 
Many investors have the same question this afternoon: why is BlackBerry Ltd (NASDAQ: BBRY) up more than 4 percent? The stock mysteriously rose on Friday after President Obama told reporters that he forgot his BlackBerry when he exited Marine...
Benzinga  Nov 21  Comment 
Shares of BlackBerry Ltd (NASDAQ: BBRY) are moving higher following news of that Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) has agreed to settle its litigation with Rockstar over Nortel's patent portfolio. Google and Rockstar agreed to settle...
New York Times  Nov 21  Comment 
“I forgot my BlackBerry,” President Obama yells to reporters as he boards Marine One.
Cloud Computing  Nov 21  Comment 
Will future generations think of BlackBerry as a fallen giant mired in its own bureaucracy and unable to survive the tidal wave of advanced, computer-like smartphones? Or will they think of it as a quintessential turnaround story of an enterprise...
Motley Fool  Nov 20  Comment 
BlackBerry may be a fallen tech giant, but one movement the company is ready for is the Internet of Things.




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Research In Motion Limited (NASDAQ:RIMM) is the leading provider of enterprise mobile services and sells smartphones. RIM generates most of its revenues through the sale of its popular BlackBerry smartphone which has become highly popular for corporate customers around the world, but its' business services generates the majority of its' gross revenue. RIM is rather unique among its peers in that it not only produces the BlackBerry handsets but also offers enterprise mobile services for which it has developed a veritable monopoly.

Company Overview

Founded in 1984 and headquartered in Ontario, Canada and led by CEO Thorsten Heins, Research in Motion (RIMM) is a leading manufacturer of wireless devices, particularly smart phone, and is the leading provider of mobile enterprise services, working to expand availability to all platforms, such as the highly successful iPhone and Android mobile operating systems. Though RIM is most known for its popular BlackBerry smart phone, the company offers a number of other products and services geared toward wireless data access and has been steadily and swiftly increasing its' presence in enterprise mobile by design or attrition for the past two years.

Originally, the company rose to fame for offering enterprise customers access to their corporate e-mail using their BlackBerry devices, eliminating the need for a separate, wireless-only e-mail account; the BlackBerry system actively "pushes" e-mail to the device, the cornerstone of RIM's claim to fame in the early 2000s. This decade more of experience has allowed RIM a significant head-start over all competition within the enterprise mobile market, with the most comprehensive offerings currently available.

Business Segments

RIMM's business is primarily divided into three segments: Hardware, Services, and Software & Other.

Currently, RIM does not break out gross margin or income per each segment even though their comments about higher growth rates and gross margins for services indicate that income from services may almost be equal to those from hardware.

Hardware (73% revenue)

RIM primarily manufactures smart phones, or devices that combine the functions of a personal digital assistant (PDA) with those of regular mobile phones. RIM is most famous for its BlackBerry wireless device, which has become one of the most popular smart phones for corporate customers. The majority of RIM's revenues come from sales in the enterprise market.

This segment has been losing market share at a high rate and is rapidly diminishing in shares of revenue and especially net income.

Sales in this segment are declining at a 17% annual rate.

Services (24% revenue, income majority)

RIM operates its own infrastructure that provides wireless data and e-mail access to its customers. RIM charges wireless providers a monthly infrastructure access fee, and the carrier then bills individual customers for the service. Though RIM's wireless data infrastructure is primarily used by BlackBerry devices, RIM does license its technology to other cell phone manufacturers. This allows other, non-BlackBerry devices to send and receive data using the same network technology. These BlackBerry Connect and BlackBerry Built-In services are available on a variety of smart phones, allowing RIM to earn revenue from customers who don't even own a BlackBerry.

RIM has swiftly expanded its' business services beyond email into a complete integration of business processes and mobile software, now commonly known as enterprise mobile.

This segment has been growing at the highest rate since FY2010 and now provides the most income.[1]

The main business divisions of this segment are:[2]

Architecture Services

RIM provides a comprehensive line of services to accommodate in-house enterprise mobile needs along with full integration with application and business Services.

Application Services

RIM also provides a comprehensive line of services to create fully customizable applications for enterprise mobile as well as integration into non-mobile software.

Business Services

RIM rounds out its' service offerings by providing the ability to fully integrate individual real world business processes to the enterprise mobile architecture and applications.

Software & Other

RIM's BlackBerry smart phones include a proprietary operating system, the BlackBerry OS. The company also offers a variety of other programs designed to utilize the BlackBerry's hardware features. These programs include a personal information manager CNBC (PIM) that manages contacts, appointments, and memos, a GPS positioning and navigation program, games, and mobile Internet programs.

RIM also sells accessories, technical support services, and a variety of repair and maintenance programs. Though revenues in this segment have been growing steadily, they have been accounting for a smaller and smaller percentage of RIM's total sales.

Trends and Market Forces

International Expansion

RIM has been expanding at such a rapid rate into international markets while swiftly losing hardware market share in Anglo markets that the United States, United Kingdom, and Canada are now reported as a single line item vs. the rest of the world.

The United State, United Kingdom, and Canada now represent 56% of 1HFY2012 revenue.

Emerging Market Dominance

"In areas of lower bandwidth (emerging markets), [push messaging] has been very popular with carriers. RIM generates approximately $4 bln in annual fees for use of its network."[3]

Android & iPhone Mobile OS Duopoly and BYOD

Now that the vast majority of existing smartphones and nearly all new smartphones are either iPhones or run the Android operating system and are being more and better received in the workplace, culminating in a policy now known as BYOD, presenting new opportunities,[4] RIM has recently begun expanding compatibility of its' products and services with those systems.[5]

BlackBerry Mobile Fusion

In response to this reality, RIM will soon release security software for iPhone and Android to easily and securely connect to BlackBerry networks.[6]

"RIM has the best mobile management platform in the business. Its recent announcement to extend management to iOS and Android is a smart move, and if sold properly will be a big hit. RIM has many thousands of system administrators that know and like BES. BlackBerry Balance technology that enforces the separation between corporate and personal data is big plus for 'Bring Your Own Device' shops."[3]

From Hardware to Enterprise Mobile Services

Consciously or not, RIM has been moving away from less profitable and highly competitive hardware to highly profitable and less competitive services, possibly similar to IBM's 90's strategy since "gross margin percentage for BlackBerry handheld devices and BlackBerry PlayBook tablets are generally lower than the Company’s consolidated gross margin percentage" and services are currently growing at a 30% annual pace while hardware is declining at 17% clip.[7]

  • Q2FY2012[7]
    • 73% Hardware
    • 24% Services
    • 3% Software & Other
  • Q2FY2011[8]
    • 79% Hardware
    • 17% Services
    • 4% Software & Other
  • Q2FY2010[9]
    • 81% Hardware
    • 14% Services
    • 5% Software & Other
  • Q2FY2009[10]
    • 82% Hardware
    • 13% Services
    • 5% Software & Other

Services Earnings May Already Have Surpassed Hardware Earnings

"ThinkEquity analyst Mark McKechnie estimates that, by next fiscal year, service revenue, combined with revenue from the much-smaller software business, will account for 24% of revenue but a mammoth 71% of RIM's operating profit."[1]

Enterprise Mobile Dominance[3]

"RIM has been long known for its push messaging service. Push is more immediate and productive. It uses less battery power. Importantly, Push messaging could be a real plus for the corporate applications (especially workflow oriented) that everyone wants to build and deliver to tablet devices. We believe that RIM's most valuable IP is in its secure, push messaging and the network that delivers it.

BlackBerry: From Phones to Networks

RIM's subscriber base is growing at a 40% annual rate by quantity while sales of phones by quantity are less than required to replace and grow existing BlackBerry phones.[11]

As a result, the term "BlackBerry" is becoming known less as a phone and more as a comprehensive business network service.

Total Smartphone Compatibility

RIM will release software for full support of all smartphones in March 2012.[12]

Potential Exit from Tablets

Because of horrible sales, in December 2011 RIM announced a large write-down of tablet inventory, acknowledging that the only way to sell them would be for a loss, indicating a possible initiation of an exit from hardware, starting with tablets.[13]

Potential Divestiture of Mobile OS Development

If RIM is in fact exiting the tablet hardware market and since RIM's tablet is the only device being sold with RIM's latest mobile OS then RIM could be halting all investment in mobile OS development.

RIM has delayed selling phones with the latest QNX operating system until late calendar 2012 when they may be quietly cancelled.[14]

Possible Hardware Divestiture and Refocus Upon Services

With the delay of QNX phones[14] and management's guidance[15] for Q4FY2012 that hardware sales will constitute the first year over year decline at a massive potential 22% rate by units and that either a spike in hardware average selling prices to approximately $330 (a 10% increase over the past full two calendar years' average to FY2010's[16]) or a more likely potential $1.2 to $1.3 billion in services revenue accelerating to a 45% annual growth rate, it is possible that management has begun to either divest the less and unprofitable hardware and/or has refocused upon services.

Competition

Research in Motion competes in several different areas of the wireless industry; it manufactures handsets, produces software such as its BlackBerry operating system, and offers its own services and infrastructure. This sets RIM apart from all of its competitors, who generally operate in hardware and mobile software and not enterprise mobile services.

Devices

At the current forecasted rate of 22% per annum decline by units, RIM will be fully exiting the hardware business within a matter of years.

Enterprise Mobile Services

As of 2011, RIM is effectively alone in this rapidly growing market. "No other smartphone company has [enterprise mobile] assets. No enterprise software or SaaS company has these [enterprise mobile] assets."[3]

IBM Entrance

"IBM said [in November 2011] it will introduce a service designed to help companies make sure that the myriad devices employees are now bringing into the office--from smartphones to tablets--are secure and protected from threats like malware and data theft."[4]

Microsoft Entrance

In December 2011, Microsoft announced that it was partnering with a solutions provider to "enable iPhone and Blackberry interoperability with Microsoft's Remote Desktop Services, Windows Azure, Active Directory in Windows and SharePoint."[17]



References

  1. 1.0 1.1 "Motion Sickness Plagues BlackBerry Holders"
  2. "BlackBerry Professional Services"
  3. 3.0 3.1 3.2 3.3 "The Strategy RIM Must Employ to Survive"
  4. 4.0 4.1 "IBM Launches 'Bring Your Own Device' Security"
  5. "RIM Adds iPhone, Android Support"
  6. "RIM Plans IPhone, Android Service Support"
  7. 7.0 7.1 "RESEARCH IN MOTION REPORTS SECOND QUARTER FISCAL 2012 RESULTS"
  8. "RESEARCH IN MOTION REPORTS SECOND QUARTER FISCAL 2011 RESULTS"
  9. "RESEARCH IN MOTION REPORTS SECOND QUARTER FISCAL 2010 RESULTS"
  10. "RESEARCH IN MOTION REPORTS SECOND QUARTER FISCAL 2009 RESULTS"
  11. "Research In Motion Limited's CEO Discusses Q2 2012 Results - Earnings Call Transcript"
  12. "RIM will help companies manage any smartphone"
  13. "RIM to write down value of poor-selling BlackBerry tablet"
  14. 14.0 14.1 "RIM delays QNX phones, offers dismal outlook"
  15. "Research In Motion Limited's CEO Discusses Q3 2012 Results - Earnings Call Transcript"
  16. "RIM 2011 Annual Report"
  17. "Microsoft Partners with Enterprise Mobile Solutions Provider"
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