RIM's Reduced Forecast Darkens Outlook - InformationWeek

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Government // Mobile & Wireless
Commentary
4/29/2011
10:18 AM
Eric Zeman
Eric Zeman
Commentary
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RIM's Reduced Forecast Darkens Outlook

Research In Motion predicted it will sell fewer devices than previously thought because it has failed to update its aging line of high-end BlackBerry smartphones.

RIM desperately needs a new smash-hit device. Its best devices, the Torch 9800 and Bold 97xx series are ancient in the smartphone landscape. The Torch touched down in August 2010, and the newest Bold hit the street during the last quarter of 2010. Instead of refreshing its core product cycle over the last six months, RIM has spent all its energy developing and promoting the PlayBook tablet. In this same period, RIM's competitors have launched dozens of category-leading Android smartphones.

That's why RIM's revised sales estimates for the current quarter have raised the alarm with investors.

Late Thursday, RIM halted trading on its stock and lowered its outlook. It had originally predicted it would sell 14.5 million BlackBerrys during the current quarter. Now it believes it will sell 13.5 million. Of the devices sold, more will be low-end smartphones, such as the Curve and Pearl, than high-end devices.

"The core thing here is that there's been a transition that's happened since our last guidance," said RIM co-CEO Jim Balsillie during a call for investors, "Our higher-end products are aging … and that's affecting … sell-through, particularly in the United States and Latin America." You don't say.

RIM is getting creamed by Apple and Google. Apple sold 18.7 million iPhones in its most recent fiscal quarter. That's a sales rate of 207,777 iPhones per day. At 161,111 BlackBerrys per day, RIM is selling 20% fewer devices than Apple. Smartphones with Google's Android platform on board are selling as many as Apple and RIM combined, with 350,000 new activations each day.

Despite the lowered sales estimates, RIM's chief execs are still bullish on the company's future. Of course, they always appear to be upbeat no matter the grim circumstances facing RIM.

"As we've said before, we feel great about the BlackBerry Platform and the PlayBook and how they're doing," continued Balsillie. "We just need to have some newer, higher-end products in the market." No kidding. RIM hasn't released a high-end smartphone since 2010.

"This is a transition," he said. "We're cutting over to a whole new platform and whole new set of products and it's very powerful and we're very excited about their long-term strength and the long-term strength of the company. We are straight in the middle of the whole tablet mobile computing space. And we absolutely have a whole next generation of smartphones, so strategically we feel fantastic, but operationally this stuff is pushed out so you have this transition."

Globally, users have been transitioning, too--away from RIM's BlackBerrys to the iPhone and Android smartphones. RIM's global smartphone market share dropped to 14% in the most recent quarter. It held 20% in the fourth quarter of 2010. Apple has 16% of the worldwide smartphone market, and Google beats everyone with 33% of the market.

With confidence in the Waterloo-based company shaken and stirred, RIM needs to pick things up during the second half of the year.

RIM has a big opportunity at its BlackBerry World conference to show off what its been working on. It is expected to introduce new devices, new system software, and other new features/services.

"We'll have a very exciting BlackBerry World next week," concluded Balsillie. "You'll see."

Indeed we will.


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