Apple squeezes BlackBerry-maker RIM

“Research In Motion gave investors a jolt when it reported quarterly earnings on Sept. 25. Margins in the current period will shrink and earnings won’t match analysts’ forecasts as the company steps up spending on newfangled devices, the BlackBerry maker said, sending shares plummeting more than 19% in extended trading,” Arik Hesseldahl reports for BusinessWeek.

“Even as RIM said sales increased 88% and profit surged 72% in the quarter that ended Aug. 30, it also said gross margins will narrow to 47% from 54% last quarter,” Hesseldahl reports.

“RIM’s numbers also revived concern that in the face of competition from Apple (AAPL), RIM will incur higher expenses as it makes products snazzier. ‘Apple is really pushing the envelope and now RIM is responding with higher-quality displays and touchscreens, and that is pushing up’ costs, says Samuel Wilson, an analyst at JMP Securities (JMP) in San Francisco,” Hesseldahl reports.

Full article here.

[Thanks to MacDailyNews Reader “James W.” for the heads up.]

48 Comments

  1. “Even as RIM said sales increased 88% and profit surged 72% in the quarter that ended Aug. 30, it also said gross margins will narrow to 47% from 54% last quarter”

    And they lost 25% in their stock price! A 50% margin is huge for hardware manufacturers.

    Spending $100Ms in failed marketing maybe the more pertinent reason for the stock drop.

  2. Read to these two comments from the story:

    “RIM will incur higher expenses as it makes products snazzier”

    “RIM is responding with higher-quality displays and touchscreens”

    Doesn’t anyone understand, IT’S THE SOFTWARE, STUPID!

  3. If you have noticed that every single web page that has had the word iPhone on it in the last six months at least has had a crapberry advertisement on it? They are petrified of the Apple steam roller stealing their business. Think of all the ad cash that rim is shoveling out to goog and that slut zdnet alone. The whole industry is pissed at Apple because of their success. Every day these web sites have more and more anti Apple articles and cheap shots. All of their ad revenues have dried up since the pc went belly up. The pc pushing sites died also. Then they went out and purchased all the Mac sites. If you have been around for awhile you see it all so clear and look at it as almost comical. Rim was also fun while it lasted. They made good phones. The future however is not cell phones. It is hand held mobile computing. That concept needs a little more zing than the claim to ‘push’.

  4. Oh man, this just confirms my view of greedy corporations. Only now do RIM include better screens to counter what Apple has to offer instead of innovating themselves and everyone else chasing them. It sure looks like they found a niche market they could sell to and sat back on their butts.

  5. You guys are all idiots. The numbers simply don’t bear out these conclusions.

    The numbers:

    -They sold 6.1 million devices in the quarter. 5.4 million devices the quarter before and they expect to sell over 7 million devices in the coming quarter.

    -Revenue was $2.2B last quarter,$2.5B this quarter, and they expect $3B the next quarter.

    -New subscribers were 2.2 million last quarter, 2.6 million this quarter, and they expect 2.9 million next quarter.

    How is iPhone hurting their business? The numbers simply don’t bear it out no matter how much you love your iPhone.

    The margin issue has more to do with the fact that RIM is introducing 4 new models in the coming months and two of them are totally new manufacturing platforms that require greater costs in the beginning of the manufacturing ramp as the company gets the processes down. Over time the efficiencies will be realized and margins will return to more normalized levels. This is just a fact of manufacturing.

    Besides, they guided to 47% gross margins from 50%, so given a $344 ASP, they still make $161 gross profit per phone. Not too bad (whoever said to rename them redberry – that guy has to be an idiot)

    Also, if you are willing to read the conference call transcripts, you will see on last quarter’s call the company explicitly telegraphed the reduced margin guidance. So they are executing on plan, not reacting to anything.

    Now the question I have is as a business owner, does it make sense to invest when you see an opportunity? or to get that little bit of extra earnings today and regret it for the next 10 years? RIM is choosing to do the right thing by investing in R&D;(up $50 million quarter over quarter) and brand.

    Don’t count these guys out. Remember they sell Blackberry on 400 carriers while iPhone will penetrate 70-75. There is also the value proposition Blackberry brings the carrier with a great data service but low network capacity requirements given their compression techniques. ATT must just love they have to spend $1 billion to get their 3G network up to snuff after all the 3G iphones and their capacity intensive users have flooded the network.

    I know it is probably difficult to use ration given the emotionally charged iPhonatics, but the reality is the Blackberry is here to stay and it will prosper along with iPhone as the entire mobile phone world upgrades to smarter devices.

    By the way, how’s that 3G battery life for you guys? Barely getting through a day? My Bold gives me two full days of usage. I simply can’t afford to not have battery life at the end of a day.

  6. @Crazylegs…

    Crunch the numbers however you like, the bottom line is that the iPhone raised the bar for all handset makers. RIM had been sitting on its laurels on top of the heap for awhile now, and their R&D;had become stagnant.

    Now RIM and the rest have been forced to try and respond to Apple by implementing improvements in the design of their products, and this has had an effect on margins. It’s as simple as that, and it is all that the article is trying to infer. Will it be short term as you suggest? It really all depends on how wisely RIM implements changes and adapts to the evolving market.

    I’m not going to sit here and say that this is the beginning of the end for RIM, or anyone one else in the race, but you can’t help but be impressed on how big of an impact Apple has made with a product that has been on the market for just over a year.

    As for battery life, I can say that 2.1 did alot to help my battery situation. While I did previously have to charge my battery nightly, it now only requires a charge every other day. Considering how much I use it, that’s not bad at all. Although I don’t quite see what all the hullabaloo is about with not being able to “… afford to not have battery life at the end of a day” is all about. Even before 2.1, it was hardly an inconvenience to connect it to its charger as I was going to bed.

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