So the Quarterly Results time is upon us again, now the Q2 period of the smartphone bloodbath, year 3: Digital Jamboree. RIM is one of those companies that reports one month before the others (Their quarters run December-to-February and March-to-May, where most handset maker Quarters run January-to-March and April-to-June etc). But we have now the results of RIM's calendar Q2. And the picture in Waterloo of Canada is getting, well, like the original Waterloo of Napoleon. Unfortunately this tragedy is playing out so far, exactly to form, as I expected in my Form Book for RIM for 2012.
Just 24 months ago RIM was selling almost one in five smartphones on the planet, strongly growing smartphone sales and had 18% market share. Since then the fall came and hard, today they sell one in twenty. Note - this fall has not coincided globally with a corresponding rise of the iPhone - when the iPhone had its period of strong market share growth (2007 to 2009) also Blackberry saw market share growth - so it is factually absolutely true, that RIM's fall was not caused by the iPhone. What has been killing the Blackberry the past two years? Android. The only OS that has seen a corresponding strong growth in the past 24 months, when the Blackberry has seen its sudden and strong decline - has been Android.
This is Blackberry's market share fall in the past 9 Quarters:
Q2 2010 . . . 18.2%
Q3 2010 . . . 15.1%
Q4 2010 . . . 14.3%
Q1 2011 . . . 14.3%
Q2 2011 . . . 12.3%
Q3 2011 . . . 8.9%
Q4 2011 . . . 9.1%
Q1 2012 . . . 7.6%
Q2 2012 . . . 5.0%
The actual unit sales have fluctuated between 10.6 million and 14.5 million in the past 24 months, as the smartphone market overall has grown by about 60% to 70% per year. Now with this Q2 sales, RIM only sold 7.8 million new Blackberries and to find how long its been since RIM made so few Blackberries in one quarter, we have to go back to Q2 of 2009, three years ago. The smartphone market has grown almost 4 times bigger in the same period.
So yes, falling from 18% market share to 5% in exactly 24 months, means Blackberry has managed to shred seven out of every ten customers it had two years ago. This would be a world record rate of collapse by a tech company who was at the time the world's second largest supplier - were it not for Nokia obviously, who has managed an even more enormous collapse in even less time. But yes. We get all sorts of bad news from Waterloo now
The total sales of Blackberries at 7.8 million is down 30% from the previous quarter. RIM's market share is down to 5%. Now RIM is in the sights of HTC, Sony and Huawei, all who sold more than 7 million smartphones in Q1 and any one of which may end up passing RIM (although we heard from HTC already that they expect lower sales for this quarter too).
The Blackberry Playbook tablet PC saw dismal sales too, selling only 260,000 units in the quarter. RIM revenues are down to 2.8 Billion Canadian Dollars down from 4.2 Billion three months prior. RIM reports its first corporate loss in many years, generating $518 million Canadian Dollar loss. The worse news is about the future, the Blackberry 10 operating system which was set to roll out on new Blackberry smartphones this Autumn, is now again delayed, now to Q1 of 2013. Blackberry will miss the critical Christmas sales period, all while a new iPhone, the highly popular Samsung Galaxy S3 steal sales, and two new operating systems, Windows Phone 8 and Samsung and Intel's Tizen launch this Autumn. The timing couldn't be worse for a delay to the Blackberry 10 OS.
So what is the new CEO to do? He reacts like most CEOs do in this kind of catastrophy, by announcing mass layoffs. 5,000 RIM staff will be fired - my heart goes out to you all, this is severe deep damaging cuts to a company that only employed 16,500 so nearly one in three of RIM's staff will be asked to leave.
I have been studying RIM and often been very confused by how their performance was fluctuating and going against most conventional wisdom. Last quarter we heard that RIM would refocus away from consumer markets to their primary enterprise/corporate market. I said that was a bad move when attempting to find growth, because the enterprise/corporate market was stagnant and the growth in smartphones was all in the consumer market. Also I pointed out that the replacement cycle in enteprise/business phones was slower than the consumer market so this would slow down Blackberry sales.
But even with Blackberry's consumer strategy Blackberry has the unfortunate problem, that in consumer markets it was an early success with the best market segment - youth. The youth bought their early Blackberries years ago - for BBM to replace SMS costs - and now those youth are not impressed with newer, often very costly Blackberry models with poor specs. They can use their old Blackberries to access BBM and use their money to buy newer (Android) smartphones from other brands. So the replacement cycle of specifically Blackberries even among the highly smartphone-addicted youth - is far slower than the norm. So Blackberry owns the two smartphone segments that have the slowest return cycles. And the recent decision to refocus away from the overall consumer market has now clearly come back to bite RIM, as it has retreated into the very segments where there is no strong growth available.
The situation at RIM is dire. They have already signed up investment bankers to try to sell the company or parts of it, or find some investors to come rescue it. The news today. Its worse than we expected at RIM. The iconic Blackberry will soon be no more. RIM has gone over The Cliff.
And if you wanted to see my overall preview of this year in smartphone bloodbath: Digital Jamboree is here. I do my quarterly full analysis and you can see 2012 Q1 all brands in smartphone bloodbath analyzed here. And yes, at the start of the year, I did my Form Book (for the 4 biggest smartphone makers) and RIM's situation was here: Deathwatch. my form book for the other three big smartphone makers is here: For Samsung 2012 is Leadwatch. For Apple 2012 is year of Splitwatch. For Nokia 2012 is Elopwatch.