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.
Tomi do you think Nokia will sell less smartphones than RIM in Q2?
If i remember well, Nokia sold almost the same as RIM in last quarter, both at 11.x.
Posted by: nigx | June 28, 2012 at 11:22 PM
RIM's platform is burning. Let's see how they handle it different from Nokia.
Posted by: Cke | June 29, 2012 at 12:33 AM
RIM went the other way than Nokia, they put all their stakes in their in house developed SW and solutions. The transition to their new OS based on QNX is a really huge threshold get over which has delayed them a lot. I think that this will pay off and they still will be a contender. At least they haven't become a prostitute like Nokia.
In this market RIM have to expect to have a pretty low market share and live with it. They should adjust their company so that it fits their market share and slowly try regain what they have lost.
Posted by: AtTheBottomOfTheHilton | June 29, 2012 at 12:57 AM
It would be interesting to see a comparison of how many employees each phone manufacturer needs in order to sell their phones per quarter.
Posted by: The Petty Tyrant | June 29, 2012 at 01:22 AM
2013 is just too late, die hard fans will love BB10 but it will quickly fade away. This is basically WebOS all over again, but it will linger longer since RIM has nothing to fall back on
Posted by: Anton | June 29, 2012 at 01:47 AM
RIM lays off 1/3 its staff? But you need all your staff to roll out a new OS.
Posted by: eduardo | June 29, 2012 at 02:46 AM
@Tomi:
You are wrong when you write "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."
It does not, your statement would only be true if the size of the market stayed the same during that time - which is not true here.
In absolute numbers, it is more like RIM lost 3 out of 10 customers it had two years ago.
And absolute numbers are what matters here: If RIM would still sell the same number of devices at the same ASP and employ the same number of people than two years ago, then RIM would be as healty today as it was 2 years ago - even though the market share would be less than half of what it was back then.
Posted by: Adrian Bunk | June 29, 2012 at 02:52 AM
RIM will survive thanks to Indonesia, where they have over 50% of market share (population 240M, 4th most populous country) with hordes of BBM fanatic users. The new CEO also seems to handle Asian markets lot better.
Posted by: G1 | June 29, 2012 at 03:24 AM
While the world's smartphone users went for full touchscreen phones with big screens RIM clung to its old formula of small screens with keypad on the same facial. Companies which can't read and follow consumer trends will be punished. However RIM's decline although sharp is not worse than Nokia.
Posted by: Kenny | June 29, 2012 at 03:32 AM
LOL. RIM followed Tomi's prescription/advice to the letter.
Physical Keyboard.
Native, in-house, differentiated OS/Ecosystem.
Lots of HW variations at different price points for "world markets".
Best platform with the best keyboards for Tomi's beloved SMS/mobile messaging.
Bandwidth efficiency for world markets.
Differentiation for Enterprises (Security) and Consumers BBM.
Yet, it is failing. Ouch!!!
Now we will see how that prescription/advice works when RIM needs to continue investing billions in native SW/Ecosystem development with dwindling sales. It is certain death.
Mr. Elop, of course knew that Nokia sales would collapse. He knew that sooner or later the sales could not carry the Symbian+Meego+Maltemi+S40 development costs, and he let someone else do the SW. They may still die, but they can linger much longer with lower development costs.
RIM has no such option. They will die the second they stop spending massive amounts on internal OS/Ecosystem development.
That is what happens when you get disrupted (Apple) and fail to keep up with the responses to the disruptor (Samsung/Google).
Very predictable. Smart money has departed RIM and NOK a long time ago. Only emotional Canadians, Emotional Finns/Europeans, emotional fan boys are left holding the stock (besides the obvious speculators of an asset/corporate sale).
Posted by: Ninvestor | June 29, 2012 at 05:02 AM
@Ninvestor, true, Tomi was hailing RIM as the true mobile success story as late as 2010. While it is true that Android's rise coincides with RIM's fall, and Samsung's rise with Nokia's fall, I don't think it is fair to say the iPhone had nothing to do with it. Android is the only OS out there other than iOS that people actively seek out. People settled for Symbian, and to a large extent there are still people who settle on Android.
So the bottom line is that Apple created the first phone and mobile OS that people actively sought out, rather than settled for, in massive quantities. This sent a lot of the OEMs into catch-up mode, including Nokia and RIM, but at the end of the day the only successful alternative that developed was Android, and so it was the biggest beneficiary.
Posted by: KPOM | June 29, 2012 at 05:16 AM
And the worst part, is that RIM and Nokia's decline are feeding into each other in a perverse negative reinforcement loop.
For example, any company interested in acquiring assets (e.g. IP/Patents), is sitting tight to see which one gets more desperate sooner. The price/patent is probably going down. The smart money (Google) already got Motorola's patents. Apple and Microsoft already loaded up on Nortel patents (and Nokia's in the case of MSFT).
Anyone thinking RIM or Nokia assets (like IP/patents) will fetch top price is delusional - that is why the stocks of both are depressed.
I'd not be surprised if RIM opens at $7.50 and Nokia at $2 tomorrow. Both pretty close to liquidation value.
And to think we are only 3-4 months away form iPhone 5, 4-5 months away from JellyBean and Windows 8, Windows 8 RT.
If anyone thinks any other ecosystems will be viable beyond OS X/iOS, Android and Windows 8 a year from now, they have a nasty surprise coming.
Posted by: Ninvestor | June 29, 2012 at 05:17 AM
To be honest, I have never understood the success of BlackBerry.
They were able to productize their emails service to the Americans, who at the time thought that pagers are the uber mobile technology. Hell, even Jay-Z rhymed that "On the country side my BlackBerry still connects" - that was pretty hilarious punch line for a non-american :D
It is amazing how far they were able to fly with this concept. The monoblock-QWERTY was the coolest thing for a few years (Nokia E71 alone sold gazillions) but then quickly died as the trend changed to touch based devices. The devices have always been bad in terms of SW and HW.
Posted by: Leading Analyst | June 29, 2012 at 05:22 AM
Again astroturfers gone wild.
What is the company that mimicked Nokia's tactics and success, but more efficiently? Samsung.
So, when comparing different strategies and their results, please compare Nokia with Samsung, not RIM.
RIM is a very special beast. They had their success in the corporate world with their very special form factor (full keyboard phones) and capability of being always connected to their email servers, particularly Exchange. This then also spread, for a limited time, also to consumers. I clearly remember when the Pearl came out, it was a cult phone to possess.
Then the iPhone came out, and after a while the paradigm shifted to all touchscreen devices AND to consumers.
Google, which was developing Android à la BB, immediately understood the world was changing, and transformed Android in an iPhone clone. And it ruled thereafter.
RIM tried to respond to this trend with the Storm, but the OS was wanting. Then they went for QNX, but there they failed to deliver: execution, execution, execution! Meanwhile, they tried with the Playbook, that was initially flawed because it could not connect directly, without a BB, and was lacking native email support (!), then when things were improved it was too late to make a change.
Summarizing, we had a company that was very concentrated in a form factor, and was unable to successfully transition to a full touchscreen experience and from the enterprise to consumer.
On the othe hand, Nokia was a completely different beast. Nokia was present on ALL form factors. It was VERY SUCCESSFUL with consumers. AND they had a viable alternative platform & ecosystem ready at YE 2010: Harmattan.
Then, the crazy (for Nokia) choice of adopting WP7 came (yeah, the stopgap POS MS itself is discontinuing after less than two years from its initial October 21, 2010 launch, which itself was discontinuing the previous WM platform).
Nokia chose the smallest OS out there, with the smalles ecosystem, produced by a company that had tried for a decade to matter in mobile unsuccessfully. A company known for bloated software, no innovation (unless when forced by competition), and the tendency to backstab its partners. Furthermore, they chose a platform that annihilated any possibility to differentiate (given the rigidities of the MS approach for WP), and that had NO compatibility whatsoever with their existing production structure (hence the need to outsource HW production to the likes of Compal). So, if Compal is making the HW, where is the Nokia advantage? Why should MS feel obliged to help Nokia, now that it has stolen all it could from Nokia?
Nokia not only partnered with the loser, but also put itself in a terrible negotiating position with it, after giving it all the farm for free. Total fail... or success, depending on what you thing the real THT Elop agenda was.
So, summarising:
1) RIM had a limited offering and a focus on the enterprise, then tried to go the full touchscreen way and consumers, but failed to execute.
2) Unfortunately, the new management is still not improving execution (given the new postponement for QNX), hence their ongoing (and possibly now final) failure.
3) Nokia was very different. They were turning around and had a transition strategy that was ready to deploy. They were strong with consumers and internationally. Their problems: execution, plus they had a negligible presence in the States.
4) Nokia chose (or was forced) to abandon its original and successful strategy and to adopt WP7 EXCLUSIVELY.
5) Catastrophe ensued.
Would the improvement in execution in the original Nokia strategy have worked? We will never know. It was Osborned on February 11, 2011 by THT Elop. The expert in corporate terminations.
Was the WP7 alternative strategy that was put in place successful? This we know for sure: it was a CATASTROPHIC FAILURE for Nokia. Sales have failed. The OS has failed, terminated after less than two years. Nokia's share price has failed.
Yet this was a fundamental lifeline for the WP platform. It was kept into relevance (otherwise it would now be at < 1%).
It was fundamental for MS. It got mobile SW and HW know-how. Carrier relations network. Patents. Maps. Clients.
At what price? Well... for FREE! What a bargain.
Should Nokia have never considered WP? Well, not necessarily. A deployment in the US only, while co-operating with MS (but making NO FREE GIFTS WHATSOEVER), could have been tried. Why not? Even better, they could have gone Android. A much better OS. Years ahead of WP. An OS that allowed for differentiation. An OS that allowed keeping one's own ecosystem (check Amazon or B&N).
Again (and my dear trolls, do not hope I will tire to repeat it), the fishy thing was not necessarily the choice of WP itself (although it now appears a crazy move after WP7 was Osborned by MS itself, and a suspicious move since many are saying that THT Elop KNEW WP7 was a stopgap OS...). The fishy thing is that:
1) Nokia chose to adopt WP7 EXCLUSIVELY
2) Nokia gifted all its competitive advantages (SW & HW know-how in mobile, Carrier Connections, Patents, you name it) to MS
Why did they do so?
Was it because WP7 was a better platform? No. It was so poor it's already dead, killed by its own father, MS.
Was it because WP7 was a huge performer? No. Were it not for Nokia, it would now have faded into oblivion.
Was it because WP7 was the only available strategy? No. I already listed all the other options Nokia had.
Was it because WP7 allowed to differentiate? No. This is a lie. WP7 allowed no differentiation by design, plus it was very limited and could not even support advanced things such as NFC, Pureview Cameras, etc. (which... Symbian! could handle).
Why did they do so? This is the question. And now they are dead.
Posted by: Earendil Star | June 29, 2012 at 06:55 AM
I think it is misleading to only look at number of phones shipped. Instead we should look at the sell-through rate. It is also not such a good idea to compare just one quarter with the previous.
Let me give you the numbers:
Q4 2011
Blackberries shipped 14.9 million
Sell through 14.5 million
Q1 2012
Blackberries shupped 13.2 million
Sell through 13.3 million
Q4 2012
Blackberries shipped 11.1 million
Sell through 13.6 million
Q1 2013
Blackberries shipped 7.8 million
Sell through 10.5 million
It makes sense to compare Q4 2012 with Q4 2011. Based on shipped numbers there's a decline of 25%. Based on sell-through rate, the decline is "only" 6%.
Then we compare Q1 2013 with Q1 2012. Based on shipped blackberries, there's a decline of 40% (!). Based on sell-through the decline was 21%.
Also RIMM did increase its net cash position from $2.1B to $2.2B from the previous quarter, so they are not heading for bankruptcy anytime soon. They did grow subscriber base from 77 million to 78 million, they did stabilize the decline in North America.
I also find it very possible they sold less phones as people would be waiting for the BB10 before making a new purchase (which they expected to be released this fall).
Overall the situation is not good for RIMM, but it is not as bad as you may suggest. Of course the shorters will manipulate and twist the facts now in an effort to drive share price lower. As an investor in RIMM stock I think now is a good buying opportunity for the long term.
Posted by: Joki | June 29, 2012 at 07:26 AM
PS: just to be clear in one of the statements I made in my previous post: when I wrote Nokia should have gone Android, I really meant ALSO Android, as a Plan B, with an Android focus on the States. Symbian + Harmattan should have continued to be the main OSs. Exactly as Samsung is doing with Android + Bada / Tizen, just the other way around.
In this way, Nokia would have continued to be the master of its own destiny.
And given Samsung's success, they would have stood a good chance of succeeding with a similar strategy.
Instead, they chose to put their fate in the hands of MS. A rounding error size company in the mobile space.
Why did they do so? This is the question. And now they are dead.
Posted by: Earendil Star | June 29, 2012 at 07:32 AM
@Ninvestor
Elop and the board already knew sales in Europe had collapsed. The in-house replacement wasn't going to be ready in time. So they switched strategy.
Apart from that, no disagreement.
Posted by: Sander van der Wal | June 29, 2012 at 07:53 AM
Reuters is suggesting one option for RIM is to join the Windows Phone ecosystem in a partnership with Microsoft. RIM and Microsoft decline to comment, but that sounds familiar somehow.
http://www.reuters.com/article/2012/06/29/us-rim-options-idUSBRE85S04J20120629
What do you make of that? Is it likely or FUD?
Posted by: N900 owner | June 29, 2012 at 10:44 AM
Reuters writes that RIM is considering an alliance with Microsoft
http://www.reuters.com/article/2012/06/29/us-rim-options-idUSBRE85S04J20120629
Hopefully that is just a rumor sourcing from Redmond. If that is true, I am even more confused. What is the actual power MS is using to blackmail poor mobile companies.
Posted by: Esa | June 29, 2012 at 10:48 AM
RIM will likely license and adapt QT from Nokia
Posted by: anti | June 29, 2012 at 12:00 PM