Why RIM Is Screwed: Limited Market Opportunity, Losing AT&T Share, Margins Getting Worse (RIMM)
Credit Suisse analyst Kulbinder Garcha thinks the latter, and says he's taken a lot of heat for his "underperform" rating and a $100 price target that's nearly 20% below the $121 it's trading at today.
But in a note today, Garcha repeats his view that the Street's EPS estimate for fiscal 2010 -- $5.41 per share -- is still 18% too high. Why?
- The smartphone market is growing as fast as he thinks it can. He's already predicting the market will accelerate to 64% unit growth in 2009 after 37% growth in 2008.
- RIM's business with AT&T -- 25%-30% of its hardware revenue -- is unsustainable. He thinks RIM's AT&T share -- 70% in the June quarter -- will drop as AT&T focuses extra attention on Apple's (AAPL) new iPhone 3G.
- New business with Verizon won't make up for lost share at AT&T. With the touchscreen 'Thunder' coming this winter, Garcha estimates RIM could get 55% share at Verizon in the December quarter, up from 32% in the March quarter. But that won't offset share loss at AT&T, he says.
- As RIM focuses more on consumers -- their fastest growing segment -- new products are going to put pressure on average sales prices and gross margins. He predicts fiscal 2010 ASPs will decline by 11% and gross margins will fall to 47.6% from 49.7% in fiscal 2009.
See Also:
RIM Getting Beat Up Unfairly, Enough Room For BlackBerry And iPhone, Says RBC
RIM Slapped: Consumer Growth 'Under Siege' Because Of Apple iPhone
Apple's iPhone Enterprise Opportunity "Larger Than Thought," Goldman Says
Im mad because it lacks a2dp, doesn't take movie clips, can't be "officially" used as a tethered modem for my laptop, and the battery life is "bad" (im actually not so disappointed with the battery life considering how much i use the device and that it gets about 2X what my laptop battery gets). I also have to diligently manage my connections by shutting off the 3G option as much as possible when i'm in a wifi zone.
And despite all these drawbacks, I can't stop talking about how awesome it is!! Now that's the sign of a mega trend, and a damn good product. As soon as the iPhone lands on VZ's network, you can bet that Apple will dominate the consumer market and quickly invade the RIM corporate market.
Why do I think this?? It's hard to explain really, get an iPhone and use it for 2 weeks and that should make it clearer.
Rimm won't die tomorrow, but the main advantages of their products will not make sense in the consumer world when compared to the iPhone. It really is an amazing device.
I was pretty effective at using the Q after 1.5 yrs of determination, but it wasn't even close to fun.
The thing is, eventually people figure out ways to spend less time with technology and more time with people. They offload all the fidgeting with gadgets to service providers, IT depts. and the like. RIM is growing market share there and doing it around the world. Apple is still concentrating on making shiny things people will replace with services in the future and has zero strengths in enterprise space where delivering on SLAs matters. Apple's supposed strength is shiny design but really sexy cool plumbing fixtures are still plumbing fixtures and most people want someone else to do that kind of work. RIM does a way better job on the invisible backend stuff than Apple ever can and practically every other mobile manufacturer out there.
Maybe the reason why lower margins at Apple are celebrated (they are competing on price to grow market share!) while lower margins at RIM are not (they can't increase profit by 100% or more ever quarter!) is because people have big short position bets on RIMM but don't hold AAPL shares.
Thanks Sebhelyesfarku, for your insightful and well thought out ideas. Very well argued. I'm sure lots of other people were similarly convinced of the value of your opinion.
But seriously, why do you and others like you even read anything on the Web and say things like this comment, that is of no more value than eruption of a festering emotional blackhead? Obviously you convince no-one of anything, so it can only be your own satisfaction at dumping on someone. Very sad.
To you and everyone like you --- I'm so fed up with this nonsense that I'm, in turn, insulting you here - for the first time since I got onto the one-month-old Web. But insults and name-calling are no substitute for making a coherent point with well explained reasons. So please grow up, or don't bother taking up space.
I believe it's the best designed and manufactured piece of equipment I've ever owned or worked with. Amazing and fun.
I don't see other companies equipment as equivalent.
http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewSoftware?id=286541579&mt=8
Also, I think I read somewhere recently that there is an app for the iPhone that can turn your camera into a video streamer (believe from one of the Online Video streaming co's, qik.com or someone like that).
Do a search.
Don't waste your time, Mr. Linehan. Mr. Farku is a certified 2 digit MacSux T-shirt wearing, mothers' basement dwelling, PC gamer/hater/egoist. One of Microsofts' finest.
There is no cure. Eventually they cheat their way to a MSCE, and become IT patchers for corporate America. Microsoft is all they have.
Are you kidding? ATT may like the iPhone for its ability to bring individual consumers on board with expensive data plans and 2-year commitments, but it's also a lot more expensive for ATT to support a device that encourages such pervasive network use on the part of nearly every user.
I'm betting on RIMM, simply because I haven't the slightest doubt that ATT will do everything in its power to push the Bold over the iPhone this fall and into the holidays. Professionals and corporations don't have the time to deal with the hurdles AAPL would have them jump over to integrate iPhones into the office.
RIM's days are numbered. And it's not just the iPhone that going to marginalize it. With all the other players offering products just as good if not better than theirs, RIM's market share has no where to go but down. Let's face it receiving ugly e-mail wasn't going to make RIM a 30 or 40 year company.
You say the iphone is amazing and can't stop talking about how awesome it is, but you only state (many) negatives that carry a lot of weight. You also say the flaws are many. Negatives and flaws that RIM does not.
Exactly... but you're on the wrong side of the point. Even though Mr. Frechette is perfectly willing to highlight the many flaws of the iPhone, he still can't find adequate enough words to properly rave about his experience with it. That should be telling you something!!
The Blackberry is a fine device in its own right. In a perfect vacuum, it is a perfectly wonderful device. But we no longer live in that perfect Blackberry vacuum.
We live in an iPhone world now. It's not obligatory that you run right out and buy one, but you will have to get used to it.
There are too many incidents for it to be coincidence and any company with that many problems and the kinds of issues we are seeing, which are annoying such as being unable to have the "to:" line lookup from address book when typing an email, must be having some serious QA and engineering issues. This is not a good place to be competing with iPhone and a new wave of smart phone UI innovations from companies trying to develop new models to compete with iPhone.
In the end, the Blackberry has good email synching and a nice keyboard, but so do other models now. But the blackberry has lousy consumer features - web browser, camera, music playing and UI and seems to have poor core software. In markets such as Asia where consumer's choose their phone, this is not a good place to be in.
Out here, unlike in North America, you are not limited to choosing a phone from an operator, unlike in North America where good operator relationships are required to get phones on the shelf and sold.
Most people in Asia buy a new phone off the shelf - or go to malls like Roxi Mas in Jakarta which is 5 floors of stores that only sell used and new mobile phones and accessories and where you can buy any phone you want (well over 500 models).
As long as there are markets where operator relationships can define what phones people can choose BBerry (and Motorola) survive. In free markets like Asia where consumers choose their own phones and with server software like Good Link and Blackberry connect, it is going to get tougher and tougher for RIM to maintain its position.
As a friend of mine who worked in mobile phone distribution for 10 years told me, if someone were to walk into a mobile phone shop and pick a phone, the utilitarian designed BBerry is one of the last phones they would choose to buy. However, have an IT guy give someone a free phone and they'll use it.
It will be interesting to see how RIM fares going forward...
All these arguments about the negatives of the iPhone take me right back to the DOS vs. Macintosh battles of yester years. And now look, Windows looks more like a Mac then ever. So, who was really right?
Interesting question. The GUI has taken over for the majority of desktops, terminals and phones, so yes, Apple was right.
What is really surprising, is that there is so much anti Apple sentiment amongst Windows users in general. Is their chosen platform threatened?... not any time soon. Can they carry on using it?... of course. Do they have to buy Apple goods?... not at all. Does the computing world need diversification?... absolutely, if only to keep MS honest and that platform moving on. Given all these questions lead to a better user experience for all, the 'mactard', 'fanboy', 'dummy' comments are actually working against their own interests. The same goes for phones, music services or wherever Apple offers an alternative.
As a Mac user for only 2 years, I begin to see the origin of Mac user defensiveness. I don't applaud it - we should just ignore biased stupidity whenever it comes along and rejoice in diversity. I am immensely pleased that Macs are still around, albeit that it took me many years of head-banging suffering to discover their staggering accomplishments that I thought were beyond solution and were actually only a simple purchase away.
Since our company offered a platform choice, about 40% of my building has gone Mac. The world did not end. Work got done. Deadlines were met and IT support is more relaxed and it must be said, far less a presence than it used to be.
So yes, they were right to carry on.
It can only mean better phones all round.
The iphone cant hold a flame to THE BOLD when it comes to the services and features corporate/ business users expect. Also, who is to say that thunder wont be a success. Knowing the quality that RIMM usually puts out my moneys on AAPL getting the raw end of the deal and ATT regretting THUNDER not coming to them.
Again this is just an opinion and I am smart enough to point it out unlike the author who is stating his words as the universal truth.
Two core areas neglected....1. explosive opportunity in the worlds to largest emerging markets - China and India. Both these alone will/could out perform US and Canada combined.
2. New technology....Iphone has a lot of good hype right now....hype...not sustainable...and bet that RIM will produce equivalent or superior technologies.
The iPhone is a HOMOGENOUS mobile device for a HOMOGENOUS market.
"Do I want to look like an imbecile and wield the EXACT same f---ing mobile device as every dickhead on the train? No."
"Do I want to be able to make a CHOICE? Yes."
Homogeneity isn't new to Apple and Apple consumers. iTunes anyone?
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