As it turns out, it appears that we were erred slightly to the optimistic side with an 18% market share estimate for 2010. By the end of the 3rd quarter, RIM has fallen to 15.3% according to information calculated from IDC, and its decent has accelerated far faster than even we (the bears) have anticipated – a full 350 basis points for the quarter. This is 6x the decent of last quarter and 7 x the decent of the quarter before that. It is quite safe to assume that they will be materially below this point at year end (the data that we crunch is lagged by a quarter). This market share loss is most assuredly caused by the outsized growth of Android, which I will demonstrate in a minute. Below are charts generated from an updated version of the subscriber document Smartphone Market Model – Blog Download Version:
As you can see above, for the full year of 2010 RIM has trailed smartphone market penetration growth and that trail has increased each and every quarter with the rate of decent rapidly increasing.
RIM’s share price has benefited from an increasing equity market as well as the announcement of new products. The Torch, although possessive of redeeming new qualities, is essentially still a generation behind Apple and 1.5 generations behind Android. See RIM Smart Phone Market Share, RIP?…
Research in Motion is following the EXACT path we at BoomBustBlog had laid out for it since the 3rd quarter of 2010. Notice the share price announcement since our January 20th pronouncement.
So, what did RIM have to say during the earnings release? From the WSJ:
Research In Motion Ltd. posted a 32% jump in quarterly profit, but the BlackBerry maker warned of lower earnings and revenue in the current period. Shares fell 10% in after-hours trading. The Waterloo, Ontario, company also said it plans to allow Android applications to run on its PlayBook tablet computer, due out next month. The move will greatly expands the number of apps available on the PlayBook. But it is a concession by RIM, as it has struggled to compete against Apple Inc. and a slew of devices running Google Inc.'s Android software.
This should be of absolutely no surprise to BoomBustBloggers!
RIM said it shipped 14.9 million BlackBerrys in the quarter ended Feb. 26, near the top of its guidance of 14.5 million to 15 million units, but below the 16.2 million iPhones Apple sold in its December quarter.
RIM has set the North American launch of the PlayBook for April 19. Executives said Thursday the tablet's rollout wouldn't be affected by the quake in Japan, and RIM plans to release three more tablets this year.
The PlayBook launch comes as RIM struggles to compete in the U.S. and increasingly relies on sales in emerging markets for its growth, where cheaper models make up more of sales.
The competition is coming in both the consumer and corporate markets, the latter of which RIM has traditionally dominated.
Again, clearly forecast in the BoomBustBlog research reports.
... For the current quarter, which ends in May, RIM forecast earnings of $1.47 to $1.55 a share on revenue of $5.2 billion to $5.6 billion. The outlook is below the Thomson Reuters mean estimates for the quarter of earnings of $1.65 a share on revenue of $5.64 billion. RIM said the guidance reflects a shift towards cheaper handsets and an increased level of investments for research and marketing, especially for its tablet. The range is also wider than usual "to reflect the risk of potential disruption in RIM's supply chain as a result of the recent earthquake in Japan," it said.
I have been preaching MARGIN COMPRESSION for some time now. Google's Android has totally upended the mobile computing space by issuing in nearly unassailable business model that pushes a technology that grows and morphs at least 2x the speed of its closest competitor. It has went from last place to 1st place in global market share in just over a year (historically unprecedented) while retaining the pole positing as the fastest growing mobile OS. RIM is getting smoked and these quarterly reports are heavily lagged and backward looking. They don't come close to revealing RIM's current position and predicament. RIM will get smoked in the tablet wars, even if it's Playbook is a hit - which I doubt it will be. Speaking of tablets and margin compression...
Android’s Disruptive Advance: Technology Refresh Cycles Previously Measured In Years Are Now Measured By Weeks? Wednesday, March 23rd, 2011
The Tablet Pricing Wars Have Commenced, Targeting Apple’s iPad 2 Which Is Not Even For Sale Yet… Monday, March 7th, 2011
Shares of RIM fell $6.45 to $57.64 in late trading Thursday, after ending the 4 p.m. Nasdaq session at $64.08, up $1.97.
Front month and two month put holders/BoomBustBlog subscribers should get paid quite handsomely!
Professional and institutional subscribers are strongly urged to review in full detail, the BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download post and the actual professional/institutional subscriber model included therein. To recap...
The model is written in Excel 2007 and is an abbreviated version of the model that we built for RIMM in house. It has 9 tabs, all of which are listed below except for the first tab which is my contact information. Upon opening the model, you should click the “Assumptions” tab and populate the green cells with the red fonts with the assumptions of your choice. Feel free to use data and trends from our Smart Phone Market Model to ensure you have the benefit of the clearly delineated historical and current trends. The current model will be replaced with an updated, refreshed version available online within 7 days. Click any graphic to enlarge.
RIM Model Assumptions
RIM Model Factors Driving Growth
After populating the assumptions tab, jump to the “Factors Driving Growth” tab and choose the player whose market share and penetration data you want to populate the valuation model for the sake of comparison. The choices are “Nokia”, “RIMM”, “Apple”, “HTC” and “Others”. This tab is annual data only.
RIM Model Quarterly Factors (driving growth)
On the next tab, you can do the same as the previous (this tab is quarterly growth). Each of the growth tabs has charts that are print and presentation quality. Just be sure to tell everyone where you got thesis, data and analysis from .
Other tabs in the model…
RIM Model Income Statement
RIM Model Device Market Analysis
RIM Model Revenue Analysis
RIM Model Device Revenues
Valuation and Multivariate Scenario Output
Final output is RIMM’s valuation using our analytics and your assumptions as input in the assumption tab above, as well as a multivariate scenario analysis showing changes in quite a number of variables (assuming all others remain the same) and their effects on your base valuation, as well as the percentage upside/downside from the current price.
I personally see a clear leader in mobile computing becoming visible in 2012. Using options, a minimum of 2012 expiration OTM and ATM contracts can be purchase at the most optimistic break points demarcated by the model above after being populated with assumptions you feel most valid. I will have a proprietary BoomBustBlog option model available for download to paying subscribers by the end of next week, at which time we will revisit the analysis above.
Reggie Middleton on Research in Motion
- There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- RIM Smart Phone Market Share, RIP?
- Android is gaining preference as the long-term choice of application developers
- RIM Smart Phone Market Share, RIP?
- Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion
- The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download
The following are subscriber downloads and illustrations. Please click here to subscribe or to upgrade your subscription.
- RIMM Forensic Analysis and Valuation – Professional & Institutional: a 45 page analysis of RIMM, it’s strengths, weaknesses and prospects and probably the most thorough valuation that I know of concerning this company.
- RIMM Forensic Analysis and Valuation – Retail: a 10 page abridged version for my retail clients, containing all that you need to know including the market scenario valuation analysis (see Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion for more information).
- Smartphone Market Model – Blog Download Version: the interactive smart phone market analysis and penetration model, includes data for HTC, Apple, Nokia and Research in Motion
- RIMM Multivariate Valuation Mode: the big Kahuna, for professional and institutional subscribers only. Please review the following overview of the model.