Mobile Solutions CI

Blackberry profit surprises on Dec 17th (Fiscal Q3 '10 for RIM)

RIM posted some solid earnings after a rough quarter last time. Here is the earnings call transcript. Note that for some reason they have labeled it Fiscal quarter 2 for RIM but this is Q3 FY10 for RIM.

Some key stats: RIM shipped 10.1 million devices and added4.4 million new subscribers, claiming 16% QoQ growth.

80% of new subscribers were "consumer", meaning they were not associated with a BES server.

There continue to be some worrying trends for RIM within these numbers. 

First, their net new adds relative to devices shipped is quite low. That looks like only 44% of devices shipped went to new customers? On the one hand it's great to show customer retention and upsell but on the other hand with the biggest channel partners heavily marketing 2-for-1 deals I think it's a real problem if this has indeed slipped below the 50% threshold. Everyone will be comparing Blackberries shipped to iPhones but the huge difference to keep in mind is that RIM is bringing 4.4M new subs in while Apple is doubling that.

And just to really nitpick, RIM didn't sell 10.1M devices. They shipped that many and sold about 9M data-enabled devices and less than half of those to new subscribers. It's a very healthy quarter but that is not kicking Apple's ass. 

Secondly, RIM's Edel Ebbs  stated that they "don't break out" international subscribers. Well, they did across all quarters in 2006, 2007, and 2008. Suddenly last quarter they stopped. There are few reasons to stop reporting that and none of them are positive ones for RIM. The WSJ is reporting international growth "at 37% of overall revenue, up from 30% the previous quarter". RIM's share of subs who were international had been slowly climbing from 25% to 35% so if the WSJ is right in their numbers they are wrong in their assessment that WW growth is driving RIM. I think Verizon, AT&T, Sprint, and the two big UK operators are driving RIM growth and the rest is ticking over at the same rate. Still upward, and still good, but at a flat rate of growth.

Third, the Flip Pearl sure seems MIA. For a company rapidly reaching downmarket to lower ASPs and youth/consumer segments it's interesting that their first departure from the standard form factor seems to be a dud.

A really positive factor to watch is RIM's tiered pricing: "As we discussed during RIM's capital market day in May, we are continuing to implement service price tiering strategies to further segment the market for BlackBerry products and services. For example, [Telecom Sao] Indonesia, in addition to its full BIS offering, also offers the lower priced version of BIS that gives the customer a more limited feature set that includes only IM and texting for the equivalent of about $7 a month."

Carriers and service providers should notice and learn from this. In the Q&A portion the meaning of tiered pricing was misinterpreted, which Balsille didn't correct, showing that this is really going under the radar.

RIM also promised to "deliver a web kit browser during calendar 2010". Amen!

FUD alert: MSFT & Nokia aliance is not RIM challenge

Well the rumours were true and Microsoft and Nokia announced a collaboration to distribute Office mobile software on Symbian devices. Reuters quotes a Nokia executive as saying "This is giving some of our competitors -- let's spell it out, RIM -- a run for their money".

FUD alert! It is not, of course, doing anything of the kind.

1. Mobile client software is not a challenge to the device, middleware, and NOC integration offered by RIM.
2. This deal is with Microsoft's Office division and not the mobile division so it does not neccessarily signal anything further than software distribution. It is in effect a bigger version of a dataviz launch. 
3. Offering Microsoft mobile does not affect enterprise buying decisions for solutions--that happens because of role admin capabilities, security from both a process and hardware/software perspective, more basic usability criteria such as battery life, UI, device durability, etc. 
4. Slapping more client software on top of Symbian as an OS is not a recipe for better integration and access to mobile business needs. Integrating those features natively in Symbian would be, but that won't happen because the OS moves to the Symbian foundation and not Nokia.  

So this is a great distribution deal for Microsoft and a nice extra for Nokia's E-Series device line. But you'd certainly think that a company that had burned through several in-house mobile email efforts, a huge acquisition and divestiture, and several partnerships during failed efforts to offer solutions competitive to RIM would know better than to use a client software distribution deal to claim parity with a Blackberry and BES solution. Doing so just demonstrates how little someone understands the enterprise mobile market.

Nokia gets a S60 email win with Telefonica Spain and Nokia Spain

Nice win for Nokia. This is the first I've seen since they devested from the Intellisync solution and moved to the new platform.

Telefonica Spain and Nokia Spain Sign an Agreement to Introduce Nokia Messaging.

Reflecting on RIM's fiscal Q4 2009 results (April 2 2008)

I finally had a chance last night to look at RIM’s earnings report from last week. RIM made news with its surprisingly strong subscriber growth, improved margins, and higher ASPs. In short they blew the doors off in a quarter when most every other company is struggling to survive.

 

The enterprise quarter on quarter growth rate slipped a percentage to an all-time low of 7% but the real surprise there is any positive growth when almost all of RIM’s key business verticals are absolutely imploding. It makes you wonder if a Blackberry has become critical for remaining part of the work ecosystem and a “have to have” even for, maybe particularly for, unemployed or job hunting workers. A slower growth rate for enterprise also makes sense with the product cycle. With BES 5.0 finally, finally ready for its release at WES (for reals this time!) you would expect enterprise activations to fall off a bit anyway as some businesses sit on the sidelines to see what the non-beta looks like in the real world before committing further to BES.

 

On the consumer side RIM saw quarter on quarter growth of 31%. They actually had a higher rate last year for this quarter but obviously off of a much smaller subscriber base. The consumer growth rate was very, very strong. It was achieved with strong margin and high device ASPs as well.

 

RIM’s phenomenal growth has some aspects that surprise me. Penetration in the US and Canada continues to accelerate, particularly amongst consumers. It’s easy to overlook just how much of a US story Blackberry remains. For the first time the reported percent of consumer subscribers hit the 50% mark while international remained flat at about 30% of RIM’s business. Dividing that out by their claimed new subscribers added you get over 200,000 net new adds in North Americathis quarter.

Think about that. RIM is now turning 200k new customers per quarter in a mature market which is flooded with cheaper, heavily advertised competitors. The increased presence in retail channels has to be a big part of this picture. RIM also mentioned Verizon’s “buy one get one” campaign and certainly that kind of subsidization has to help. But whatever the method the surprise to me is that in a deep recession consumers are willing to buy high end devices and relatively expensive service plans.

What does this mean for competitors? Apple is driving operators further into RIM’s arms and RIM is delivering while others are not.

 

For Microsoft, it means WM 6.5 is not enough and not in time. Microsoft needs to get past focusing on pushing a mild OS refresh and deliver integrated services, own or partnered, to the table in campaigns with direct marketing support for specific devices. On the server side it also looks like SC MDM hasn’t been enough to put a dent in enterprise growth for RIM. Faster integration back into the overall Systems Center architecture and better packaged roles and policies are two immediate fixes that come to mind, but Microsoft should consider a full strategic re-think about how they are playing in enterprise mobility.

 

Nokia faces a similar problem to Microsoft in competing against RIM for consumers. Their worldwide smartphone market share has dropped to 47% and given these numbers Nokia can expect to hit 40% soon. It’s a stunning loss of value. Creating Ovi services is a great long-range plan but by the time that all comes together what market share will they be operating off of? Packaging existing devices by optimizing them for specific core services is becoming one of the few meaningful cards left for Nokia to play. That would give them a chance of actually getting a certified device to market in a reasonable time and then perhaps even marketing and supporting that service through a carrier. This is a North American prescription but this model will be needed in other regions as well.

 

Competing against RIM in services will be no easy task. The one real weakness, music, is owned by Apple. RIM is relying heavily upon internet radio startups who are facing an ugly death when the VCs who fund them finally find out that music labels are not rational business players. That whole model is doomed and iTunes is one of the only healthy ecosystems in music.

 

Video has a lot of potential. As RIM described at some length in their conference call, the NOC and the compression technology RIM runs over it becomes a huge advantage there. Microsoft trumpeted video at the CTIA keynote but as RCR Wireless noted their key US partner’s service terms wouldn’t even allow what Robbie Bach was describing. If they did they would find their network hammered. If these types of services really do start to take off I think RIM is correct in believing they will be an even more valuable partner to operators. What is the strategy for the other players? Sideloading? Building in WiFi only service capabilities similar to the iTunes download restrictions for files over 10MB? No easy answers there.

 

RIM’s real competition for the next year or two will be winning non-smartphone customers and indirect competition from specialized, stripped-down entrants. Think of the Peek,  Hutchinson’s INQ, and some of the netbooks coming out. The INQ in particular is a space that RIM should have owned. The app store has been a distraction for RIM and other vendors as they overlook creating complete service offerings per carrier with services such as the social networking device.

Motorola dishes off Good Technology to Visto | Between the Lines | ZDNet.com

Motorola dishes off Good Technology to Visto | Between the Lines | ZDNet.com.

Interesting, if not puzzling, move by Visto.

Good had a very nice client but the server was weak. Intellisync had great server-side technology but the client was so poor that Nokia never got it off the ground. Now both acquisitions have been canned (by Motorola and Nokia respectively). Whoops, there went that billion dollars.

Visto presumably thinks it can port Good's enterprise clients over while integrating it's backend platforms. This is a very risky time to make such a bet. Visto must believe that high-end mobile email customers are a neccessary part of their customer portfolio. These customers require an enterprise solution and need much better GAL, contact, and calendar integration than Visto has with a better UI on high-end smartphones.

Could Visto have developed its way there for less than it bought Good? In Motorola's current state it probably was willing to basically give Good away. Visto may also have bet that Good carries a much better brand in enterprise than Visto and will enable deeper ties into some Tier 1 operators where Visto has struggled to maintain traction.

However after the acquisition Visto will find itself in the same position, with slightly more scale: Operator accounts with reasonably good client-side products but lacking the sell-in of RIM. If Visto can't solve that problem with price conscious consumers, how will targeting high-end enterprise users who have much more complex sales cycles help?

Can SyncML survive Microsoft's expansive licensing of ActiveSync?

Microsoft continues to license its ActiveSync protocol to competitors. It's a great move by Microsoft as it ties email to Microsoft software and preserves Outlook and Exchange share. It's a great move by Google as it broadens the reach of other Google mobile services.

Many of the fastest growing email, mobile calendar, and mobile contacts-syncing startups rely upon SyncML protocols to extend data synchronization to feature phones. They generally go to market with a "Blackberry for the rest of us" message and thru SyncML are able to target basic feature phones. ActiveSync as a protocol is really only meaningful to smartphones.

However, this seems like an increasingly perilous positioning when you combine Microsoft's licensing and down-market pushes by RIM, Google, Nokia, etc. with the aggressive trend for device makers to enrich feature phones with smartphone-like capabilities and price and position smartphones across consumer segments. How long before most phones are smartphones or the term becomes meaningless because of the capabilities of all devices?

Firstly, as Google continues to push into the sync market the consumer price expecation goes ever more rapidly to free.

Google licenses Microsoft’s ActiveSync, beats rival to market with synching service - RCR Wireless News.

Secondly, RIM itself is finding new ways to reduce the cost of its service. And while it will never have the broad reach of an industry standard, neither will services which reach all handsets find compelling ways to drive uptake of add-on pricing services for email, social networking, and device backup. If they could SEVEN and Visto would have cracked that nut some time ago.

Synchronica and other mobile email startups would do well to try and leapfrog RIM in packaging prepay services with specific devices to drive uptake. By choosing a limited but targeted set of the most mature and common devices, and working hard with operators to co-create and fund marketing and demand generation, they could offer downward compatibility to existing handsets and offer operators a real chance of turning email into a mass consumer proposition as promised for so many years.

Instead, what you see are resources poured into building out support for more handsets. This won't work. The consumers who want email as a core service, i.e. will pay for it and/or use it at least weekly, will choose handsets and services which have a decent experience for messaging. Those handsets support ActiveSync and other third-party services to deliver messaging. The huge mass of consumers who don't want these kinds of handsets and services will be served just fine by sms and next generation messaging, such as Twitter, which uses sms as a platform. This broad pool of consumers will not be reached by extending a stripped-down email service which is not great to more and more handsets. Synchronica is chasing a segment that is dipping in size faster than it can be monetized.

How to segment the mobile e-mail market

This RCR article made me spit my coffee back out when I read that ABI research, a great research firm, was quoted as saying “It’s hard to quantify, especially if you want to include things like the Gmail application,” to bolster the idea that measuring the mobile email market is hard.

Are you kidding me?

Who’s delivering e-mail to all those fancy smartphones? - RCR Wireless News.

If you need to segment or size this market, give me a ping. I've been doing it for years at very granular levels across regions. In fact, for some of the people quoted in this article. I could see if the article were arguing sizing microblogging or emerging services was difficult, but email? Give me a break.

There is also a mistake in this article about Blackberry Connect, but I'll leave it at one complaint at a time.

Synchronica continues to win deals, is it driving uptake?

Synchronica has been increasing its dealflow since acquiring Axis. It's footprint is growing as it lands deals in EMEA and now LATA.

Has anyone heard feedback regarding uptake for Synchronica?

It's lack of news on end customer uptake over the past year suggests that similar to Visto two years ago, ability to gain traction with operators is not translating to steady success driving sell-in

Consumer mobile email pricing holding steady

This deal announcement from Synchronica seems to indicate that consumer push email pricing is remaining steady despite slow sell-in relative to Blackberry and hard times economically.

SmallCapNews | Synchronica picks up new agreement with internet service provider in Asia.

Update on Synchronica

Here is a short interview with Synchronica. No useful metrics about growth which haven't already been disclosed but it does have the complete high-level pitch and positioning (vs SEVEN, Visto, etc) for Synchronica all in one place.

 Synchronica's CEO, Carsten Brinkschulte Speaks to Proactive Investors - Synchronica plc.