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RIM Gains Market Share

Posted on Friday, Jun 19th 2009

Research In Motion Limited (RIM) (NASDAQ:RIMM; TSX: RIM), a leading mobile phone vendor with annual revenue of $11.07, billion beat estimates for its first quarter. Close on the heels of the Palm Pre and the iPhone 3.0, this week RIM unveiled the BlackBerry Tour. And although Palm and Apple are heating up the convergence device race, RIM still seems to be on top with 55% share of the US smartphone market; Apple is at a distant 19.5%. Let’s take a closer look.

Q1 revenue was up 53% to $3.42 billion on shipment of 7.8 million devices driven by Verizon’s Buy One Get One Free campaign. Net income was $643.0 million or $1.12 per share versus $482.5 million, or $0.84 per share last year. Adjusted net income was $564.4 million, or $0.98 per share. Analysts expected earnings of $0.94 on revenue of $3.5 billion.

RIM added 3.8 million net new BlackBerry subscriber accounts and ended the quarter with 28.5 million subscribers. Device ASPs were approximately $357, in line with guidance and lower than Q4 due to shifts in produce mix.

RIM ended the quarter with $2.42 billion cash. Gross margin was down from 50.7% last year to 43.6%. With more and more product launches to keep up with competition, RIM’s gross margin has taken a toll. Last quarter it was just 40%, and it is only due to the company’s cost-cutting measures that the margin has improved this quarter.

Despite the iPhone’s unique interface and OS, RIM continues to gain market share because of its successful BlackBerry platform that is extremely popular with prosumers and now with consumers, too. This quarter, about 80% of net subscriber additions were non-enterprise and accounted for about 50% of the BlackBerry’s subscriber base. The recently launched BlackBerry App World has had some 15 million downloads of social networking applications. In my last post, I said RIM should focus on developing applications for the enterprise, its stronghold and the iPhone’s weak point. RIM has recently made available push APIs that developers can use to create real-time push content like Hockey News and Pocket Express.

RIM recently announced the BlackBerry Tour, which has a QWERTY keyboard. And though the company’s market share is not likely to be at stake in the near future, I hope that like Palm with its Palm Pre, RIM also comes up with an improved operating system and interface – that would really heat up the convergence device race.

For the second quarter, RIM expects revenue in the range of $3.45-$3.70 billion and EPS of $0.94-$1.03, in line with Street expectations. Gross margin is expected to be 43-44%. Net subscriber account additions are expected to be in the range of 3.8-4.1 million. The stock is currently trading around $77 with market cap of about $43 billion. It hit a 52-week high of $83.77 on June 10. I had earlier explored the possibility of a merger with Dell.

Chart for Research In Motion Ltd. (RIMM)

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Palm Pre has a mix of feature of both Iphone and Blackberry. But its initial market performance seems weak. Why so?

Gaurav Parashar Friday, June 19, 2009 at 10:27 AM PT

RIM clearly has a lot of things going for it. The biggest question is maintaining that growth. Although they are the most potent player in the smartphone space, they have the lowest economies of scale compared to their nearest competitors namely Apple and Nokia.

With phones and PC’s more and more having same or similar components, RIM will be at a competitive dis-advantage compared to Apple.

In recent times, Apple has made strong moves indicating they are going after the business users and with recent price drops of the iPhone this look more and more likely.

However, RIM would not be a good match for Dell as a acquisition. Although price for RIM would be high, but it goes back to culture of the company in many ways. Dell still has a hardware mindset and emphasis on supply chain/operational efficiencies, whereas clearly RIM’s strength’s are in software and services, where HP excels.

HP also has been gaining considerable market share in the business computing market and recent partnerships with Alcatel-Lucent would provide more impetus to acquiring RIM.

Thanks,
Vishal

Vishal Grover Friday, June 19, 2009 at 1:49 PM PT

Hi Sranama,

Well written, we are on a similar wavelength:

http://dnenni.wordpress.com/2009/06/17/smartphones-are-stupid/

Media Phones will make dramatic advances in the near future!

Cheers,

D.A.N.

Daniel Nenni Friday, June 19, 2009 at 2:23 PM PT