BlackBerry Storm: Press and Be Depressed?
by John Paczkowski
Posted on February 11, 2009 at 9:35 AM PT
Are Research in Motion customers opting for the company’s Curve and Pearl BlackBerries over the BlackBerry Storm, its new touchscreen smartphone? Or are they trading the Storm in for one of those older models? That would seem to be the implication of the company’s announcement today that its fourth-quarter profits could fall on the low end of forecasts despite good growth in subscriptions.
RIM (RIMM) expects earnings in the fourth quarter to be at the low end of its earlier target of 83 cents to 91 cents a share. An interesting data point to consider in light of the company’s claim that it had “record levels” of net subscriber additions during the month of December and predicts subscriber additions for the quarter ending Feb. 28 to be more than 20 percent higher than previously estimated.
“RIM achieved a very strong start to the holiday buying season and the momentum carried on stronger than expected during the past seven weeks despite a seasonally slower time frame and the challenging economic environment,” co-CEO Jim Balsillie said in a statement. “We are pleased with our leadership and momentum in the market after shipping our 50 millionth BlackBerry smartphone in January and introducing a range of new products that are achieving exceptional early results and helping attract record levels of new customers to the BlackBerry platform.”
Unfortunately for RIM, those “exceptional early results” and “record levels of new customers” don’t appear to be enough to ease investor concerns that its profits are waning. Shares in the company slid more than 17 percent in early trading today.
Comments
John – you’ve got it reversed. The lower margin is consistent with the idea that RIM’s product mix during the quarter was heavier with new products like the Storm and Bold. If customers were opting for Pearls and Curves or trading in the Storm for older models (which Verizon says is untrue), then RIM would actually have higher margins in the short term. Their newer products have lower gross margin in the first few quarters while they ramp volume and optimize supply chain. The reality of the situation right now is that RIM is growing its market share at the expense of profits. That is good news for mid to long term investors and bad for short term investors. In this economy, there are more short term investors, so the stock tanked, but trading volume is high and there are obviously a bunch of people loading up on what they see as another buying opportunity.
Posted by Bill Carlin at February 11th, 2009 at 11:15 am