Three burning questions loom as RIM gets ready to report

RIM Earnings Preview Q3 2013

Some people say that the November quarter that Research In Motion (RIMM) will report this week is not important. They are wrong. Even though the new BlackBerry model range debuting in 2013 is the key for RIM’s long-term survival, there are three issues that are vitally important for the company right now. RIM must keep certain aspects of its performance from caving in before the new phones begin trickling to the market early next year, and here are three things to watch for as RIM reports its fiscal third-quarter results on Thursday.

  • Global subscriber base. RIM surprised the market when it reported its summer quarter by showing continuing global subscriber growth despite its U.S. collapse and European trouble. Blackberry’s growth has continued in Africa, Middle Wast and South-East Asia, giving RIM surprising longevity considering its share of new smartphone sales in America may have caved below 3% by now. However, a recent Kantar Worldpanel study showed that in the three months ending in October, BlackBerry market share slipped badly in markets like Brazil and Spain. Until last summer, RIM had maintained a decent grip on Latin America and Mediterranean countries via its cheap Curve devices. They may have finally started eroding even in those countries where BlackBerry had retained some vigor as a low-end youth brand. After its surprisingly robust 80 million subscriber base number from the summer quarter, RIM can afford to show a bit of erosion in November and February quarters. But steep drops would be deeply worrisome — RIM may not get aggressively priced low-end models based on the new OS out before next summer or even autumn.
  • ASP level. RIM has experienced steep average sales price decline over the past year. Nevertheless, another major plunge is still possible. In the UK market, BlackBerry Christmas promotions are almost entirely built around the cheap Curve 932o — and its price as a pre-paid model has plunged to unprecedented 99 pounds. This is exceptionally low for a model that debuted just last spring. European operators have effectively abandoned RIM’s more expensive business-focused models like the Bold. BlackBerry phones are now being marketed as some of the cheapest smartphones anyone can buy. How deep will this cut into RIM’s ASPs? If the plunge is bad enough, reversing the damage with new high-end models next summer may be extremely difficult. The core customer base for RIM’s high-end devices was built on the U.S. and the UK markets, but RIM has wiped out in America nearly completely and the UK carriers have switched to marketing BlackBerry handsets as bargain bin specials on par with Huawei or ZTE models. If BlackBerry ASP level dives too low during November and February quarters, undoing the damage will be a herculean task.
  • BlackBerry Messenger popularity. Business News reported last January that BlackBerry Messenger was growing at 140% pace in Nigeria, one of the key African mobile phone markets. BBM’s user base growth last winter was also torrid in South Africa. However, stand-alone messaging apps like WhatsApp and 2go have delivered scorching growth in Africa and Asia during 2012. 2go has soared ahead of Blackberry Messenger in popularity in Nigeria and is spreading rapidly in South Africa. WhatsApp became a top-three iPhone app in more than 100 countries last winter and offers cross-platform support that is a big draw in the South-East Asian markets that remain RIM’s lifeline: Malaysia, Philippines and Indonesia. Globally, WhatsApp has grown from relaying 1 billion daily messages in the fall of 2011 to 10 billion by fall 2012. By now, that rampant growth may have started encroaching on BBM popularity. RIM does not report on Messenger user numbers every quarter, so visibility on this front could remain limited in coming months. But any erosion in the Messenger user base is likely to have an impact on RIM’s overall subscriber base.
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