Ouch. Time for Humble Pie. The one smartphone I 'promised' didn't gain market share: RIM Q4 and full year results

So, its time for the humble pie. I am sorry. When I did my preview to this 'Year of the Bloodbath', I went over every major brand in January of this year, with my best insights of who does well and who does poorly for the next 12 months. The one smartphone maker that I singled out as the one that was sure to gain market share was RIM and its Blackberry. I was very sure of that forecast. They have just reported their latest quarter (ending November) so we have (close enough) info for the full year, and its clear, I was wrong in my forecast. Sorry guys. But first the results.

RIM reported good growth of 14% from the previous quarter, and 40% growth from this point a year ago. They would be astonishing growth numbers for almost any company in one quarter and year in any other industry. Except that smartphones will grow roughly 25% in just this past quarter, and about 74% for the full year. Obviously, if you grow less rapidly as the industry average, you lose market share.

Note the 'leapfrogging' now with Apple. Apple reported Q3 numbers of 14.1 Million and bragged about passing RIM. As their quarters do not completely overlap - Apple current quarter ends December, RIM's ended November - now we have RIM's 'next' quarter, and they just edge past Apple at 14.2 Million. Its almsot certain that Apple does better than that for their Christmas season (last year Apple grew 17% from Q3 to Q4 in unit sales) so expect in the next Apple quarterly results, that they report they have 'again' passed RIM haha. We may see this neck-to-neck battle for many quarters now haha..

For those who are interested, RIM is very profitable doing this. Their customers are increasingly from abroad and the majority of their sales are now with consumer customers, not enterprise/corporate customers (mostly youth with messaging addiction).

For the record, I had projected RIM to end the year with market share of roughly 22% - 25%. They will end with roughly 16% for the full year. OUCH. Thats VERY big error in forecasting (my error from the mid-point of my forecast, is 30%). Well, at least the good news for me, is that it seems like this was my worst error, most of the other big names are coming much more close to my 2010 forecast haha..,

What can I say. I honestly believed the reasons why I thought RIM would do better, they ddin't. They still grew - 40% growth in a year while being one of the most profitable companies in the business, is good performance in most other times, but not this year in mobile. Not in the 'year of the Bloodbath'.

Which gives us a 'Magic Number' for those watching Apple. The magic number is 17.2 Million iPhones for Q4. If Apple reaches that level, they pass RIM for the full year 2010 and become the 2nd biggest smartphone maker in the world, for full year sales. If Apple doesn't hit that number, they remain 3rd biggest. Oh, and those who want to consider the Scobleizer's claims that Nokia is 'doomed' - Nokia is already guaranteed to outsell both Apple and RIM combined for this year. So yeah, I wouldn't be getting the shovels for grave-digging just yet haha.

Guys, 'my bad'. I am sorry. I really did believe that forecast, but as any forecast by any of us in the professional crystal-gazing industry, we always get many of them wrong, that is the nature of forecasting. The point is to try to be accurate more often than wrong, and to try to be less inaccurate than rivals. Lets see how the rest of the smartphone numbers pan out for the full year of the bloodbath, to see if perhaps any of my other forecasted market shares end up more accurate.

For those who don't want to go read the full forecast blog, here is what I said on January 8: Nokia first 35%-40%, RIM second 22%-25%, Apple third 15%-18%, fourth Samsung at 8%-12%, fifth HTC 5%-7%. Lets see how they pan out, we'll know HTC during December and the others during January. And for those wondering about Apple's 'peak' forecast, that we probably won't know until early February because we need the full year smartphone sales number, not just Apple's number, but its close. Obviously those who wish there was no peak, need to hope for a great iPhone quarter and a modest growth total smartphone quarter haha..

Comments

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I have never read such a wonderful article and I am coming back tomorrow to continue reading.

[kevin]

Tomi,
RIM reported on its conference call that unit sell-through was only 12.3m, and thus, inventory increased in the quarter. Now we know exactly why the units sold in the quarter was 14.2m.

I don't know why it matters whether Apple is no 2 or 3 for the year; those are arbitrary boundaries and there is no prize for being no 2, so your magic number is just as arbitrary. The key is that the trend is in place - iPhone is growing at or better than the smartphone market for the last year; RIMM has been below for at least the last 9 months. Most analysts think iPhone will reach 16m in unit sales for the 4Q; that may be enough in yoy growth (84%) to top the smartphone market growth once again.

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Je vous remercie de prendre le temps de publier cette information très utile, je suis toujours en attente de quelques idées intéressantes à partir de votre c?té dans votre prochain post merci.

[Phil W]

Ok Lee, I'll bite. The reason why Apple takes the Lion's share of the profits is that it is playing a very high stakes game. It plays only in the highest part of the market where the profits are the best. It's high risk because one slip and Apple could lose the market and its profits completely. Do I think that will happen? Probably not, because Apple is extremely good at what it does.

Other companies do not want to take that risk, so opt for the more conservative approach of addressing all market segments (as a Nokia employee, I'm thinking Nokia here) This is safer as no one slip is going to put them out of business. This is inevitably lower profit business, but not no profit business. However because profits are thinner, volumes are important.

So in summary for Nokia and Samsung et al, market share is extremely important to maximise the profit they can make. Apple is playing a different game, they only care that they have some market share (but it needs to be reasonably sustainable), they don't need to maximise it like the other companies.

So the fact that Apple is trouncing everybody else with profits is non-news, they would be in trouble if they weren't.

And Nokias market share has been holding up reasonably well and not falling as drastically as you imply and with the refreshed portfolio will stabilise and maybe increase. We'll see next quarter.

Finally, since this stream is about RIM, RIM is closer to playing Apple's game in that it targets one market segment very well - the enterprise market. Unlike Apple it is branching out from that niche, but is struggling a little.

[Guillaume B]

There's two paths RIM can go at this point. They can try and move their QNX platform they're introducing to the PlayBook to phones. But if I were RIM, at this point, I'd be looking into moving into a services business.

They're too small to compete effectively alone in this market environment.

They could become THE universal business platform for all smartphones. Work closely with other smartphone OS makers to have hooks for a Blackberry platform to enable device management through BES that would work as well with Android phones as with a Nokia or an iPhone, a cross-platform compatible Blackberry Messenger a secure, encrypted email client. They could become a must for every smartphone owner. They could also license this all to featurephones and messaging phones.

The potential market here is huge, as you know Tomi.

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Arghh.. yeah, thanks Claus212 - I didn't notice I apparently took all numbers from the wrong column for Nokia, and didn't see that being 32% (should have been 23%). So the numbers should have read 76%, 23% and 1% for Nokia. Now it is (finally) correct. Thank you

I will return to comment to the others later

Tomi :-)

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"Finally, since this stream is about RIM, RIM is closer to playing Apple's game in that it targets one market segment very well - the enterprise market. Unlike Apple it is branching out from that niche, but is struggling a little"

Tomi i think it is important to point out that RIM's success in branching out is actually very successful. Sure if you look at the raw shipment numbers, the success of RIM in the international and youth/messaging markets looks luke warm. Of course these markets pale in comparison to the size of NA or WE.

When you look at the growth rate in these regions the pattern becomes very promising. Push this growth out a couple of years and the NA situation will be irrelevant. the CEO's have publicly stated that they do not want to be involved in the arms race that is taking place in the US and that the global stage is the one they want to play on. (i believe you would agree that outside the US, the smartphone game is a different beast).

What's more....the driver of their international success is messaging. A service proven to be addictive and very profitable.(what's more....they are giving it away for free). To me that sounds like a very strong loyalty builder. As RIM starts releasing more advanced devices (and they will), the kids hooked on RIM today can aspire to higher end devices or stay with the affordable offerings that are also in RIM's portfolio. (and in prepaid markets, affordable means something).

I feel that due to the recent disruptive elements and growth in the smartphone market, people are looking at each quarter and changing their opinions. It has gotten to the point where one year is considered the long view. However if this is expanded to a three year view, i think opinions would shift back towards a positive RIM future. Key thing to consider:
1.QNX is a good OS (i know that is a simple answer, but check out the details on your own..you will see)
2.RIM acquisitions : RIM has shown that it is very good a recognizing where it is weak, and then buying a company (such as TAT) to fix the problem.
3.As developed markets choke on the explosive high end smartphone growth, the smart guys looking 3 years out, are now laying roots in places like India and China where the ability to provide low cost smartphones (or even better, low cost data services) will win big.

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