Mobile Solutions CI

RIM's co-CEOs to step down | Mobile - CNET News

Research In Motion's co-chief executives have resigned their positions as part of a management shuffle, the company announced this evening.

via news.cnet.com

Balsillie and Lazaridis are stepping down to be replaced by their COO. It must be very hard for them to make this move. It will be interesting to see what affect this has on the decision making within the company. At the senior level it still feels as if RIM is the only one who doesn't understand how far behind the market it is. Will that change overnight? Or do they need leadership from outside the company to cope?

This was the one move they had to leverage for a statement acknowledging a need to change (more to the analyst, carrier, and IT segments than end users). However the strong "business as usual" statements ignored that opportunity.

As RIM stands now it's hard to believe they exit 2012 a standalone. Given this will not be an attempt to revitalize the brand or product portfolio it looks more like housecleaning in advance of a deal.

Android chips away at Nokia and RIM from low end, Apple takes high end

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via www.rcrwireless.com

This article actually makes a contrary point to the headline. Look through the android devices named in the article as leading sales across US carriers and it shows Android splitting both high and low end. This seems to indicate the Android platform has been successful in its strategy of going across form factors and price points, even at the expense of fragmentation. The result will be that all the main players in the US mobile industry will continue to be heavily incented to work against helping developers consolidate the Android consumer experience.

RIM Cuts Profit Forecast as BlackBerry Demand Falls Short - Bloomberg

Research In Motion Ltd. (RIM), facing intensifying competition from Apple Inc. (AAPL) and Google Inc. (GOOG), cut its sales and profit forecasts for this quarter on slower-than- expected demand for BlackBerry smartphones. The stock plunged.

via www.bloomberg.com

The stock plunge is a reflection of the opportunity cost facing any manufacturer who misses an entire quarter on a product refresh. With smartphone adoption shifting rapidly to mass consumer segments, RIM just lost another critical window to acquire new customers. The market growth for that window will instead keep going to Android and Apple.

Not only is this the second big slip on this important generational upgrade for RIM devices, but they are now unlikely to make 2012 holiday promotional programs in the US. This is a huge miss for RIM.

RIM goes off the platform -- BBM as roadmap strategy

The past week or so has been a busy news period for RIM. Their CMO resigned just before playbook hits the market, a key supplier earnings support (Marvel) has started speculation about a low-cost move in the handset portfolio, and lost amidst all of this comes speculation published on long-time Blackberry leak newsite BGR that Blackberry Messenger (BBM) will go cross platform.

This last piece is the smartest thing RIM has done in years! I'm so curious how the person driving that product got the buy-off to do this as I've been unsuccessfully trying to implement a similar strategy for several years now. Neither from the OEM side or carrier side can I get buy-off to actually do it so hat's off to RIM for pulling the trigger.

Now they will be extending a core use case off their devices to expand their customer base. Best of all they get to use license fees, which pay for NOC traffic, to have carriers and enterprises pay the cost of delivering over the top. Brilliant!

In the future I hope to see many device companies follow this model. First build the user experience, propagate it through Facebook and Android and iPhone apps, iterate as it builds, then once you have a living community build the physical platform/product to optimize the experience based on actual usage information--UX traffic paths, day/time/place/intensity/frequency stats, support feedback, time on page analysis, and perhaps most importantly studying where people are falling out of the experience. 

For RIM this allows them to extend their customer base off of Blackberry OS as it is today, onto the application layer (both on and off device), then bring those customers back to the QNX platform within a familiar UX. What a great platform migration roadmap to solve the problem of an active user base--and what a great way to incent current device owners to upgrade to new QNX devices.

RIM earnings Q4 2010: US consumer bounces back, but mostly within installed base

RIM released their financial Q3 2011 results yesterday, revealing a positive bounce in consumer subscriber adds while holding steady in enterprise and overall North American adds.

As usual the best information is to just read through the earnings call transcript. Oh how I love seekingalpha.

Overall consumer growth rate was actually flat at 12% quarter on quarter, but within the US RIM bounced from about -5% last quarter to about 5% this quarter. This huge swing is important as a demonstration that the new OS, handsets such as the Torch, and the email/messaging-first proposition overall still have resonance with consumers. However, if I am doing calculator math correctly while also balancing my coffee, dividing new subscribers by devices shipped show an all-time low of 36% acquisition. Even when you discount this dip for holiday channel fill that number should not be dropping, only slowing. RIM is getting better at selling new devices to existing subscribers but getting worse at acquiring new subscribers.

Another thing to note: This growth rate seems to have been purchased by AT&T creating demand for and then promoting down the Torch 2-year subsidy price. "In the United States, Torch was launched in two new colors, red and white, to coincide with the $99 pricing from AT&T and sell-through run rates have increased as a result of these programs". RIM proves here that without hero status at AT&T, VZW, or Sprint (arguably only the first two) they are not a growth prospect in the US. One of the big two carriers has to spend RIM into growth. They can't do it on their own. Given Android's rapid growth in first time smartphone buyers this is a troubling trend which is not reversing.

With a total NA subscriber base of around 26.8M RIM will have trouble demonstrating critical mass and momentum to content developers. Figure at least half of those subs are on BES or older OS phones which cannot access or run app world, and believe me 50% is really generous, and you have an installed base of 12-14M. That's not big enough to drive investment from games and content developers who increasingly rely upon internet-size audience scale to support advertising, freemium, or in-app revenue models.

The JP Morgan analyst asked about this dynamic in the last question taken at Q&A. Balsille's answer is basically "we have a tablet, and some cool devices we will show at CES". That's pretty weak considering what a softball question this is. The tablet doesn't address the scale issue and actually highlights it--how will Playbook draw evergreen content if it is a single device and only rolls onto a base of less than 15M? And no, "eclipse development tools" is not an answer.

The "we sell through carriers, not against them" is more interesting but given the flatness we see on the devices side for subscriber acquisition in NA relative to years past this also rings a bit hollow to me.

How VZW promotional focus may be mobile's most explosive catalyst

Last week some very interesting news slipped by in the busy holiday rush. At a Credit Suisse briefing Motorola's Sanjay Jah warned that Verizon's competitive actions during the first quarter of 2011 could impact Motorola’s financial results. Sandwiched in to the Q&A of a typically optimistic briefing this is a real eyebrow raiser.

Here are his exact words: "At Verizon, there is a competitive dynamic developing, which may have an impact given our strong relationship with Verizon. I think that may have an impact on our first quarter." (The full webcast is on Moto's investor page)

What Moto is signalling is that VZW’s Droid campaign will take a funding hit as Verizon spends that resource elsewhere. Where else? All signs point to an iPhone CDMA launch at CES and that is the most likely candidate. VZW may have more aggressive marketing and promotion of iPhone than anticipated. I had thought that VZW would basically let Apple do the heavy lifting on the VZW iPhone and not bother to feature it too much--they probably reasoned that most defections had already occurred, the Android superphones are effective acquisition tools for them, so why not continue to focus there and let Apple drive incremental adds without adding painful Capex promotion to an already heavy opex investment.

But Jha's comments make me rethink that reasoning. Verizon's  CEO is keynoting CES and expected to announce iPhone at that time, so that is another indicator it will be a higher than expected priority for VZW.

What Jha, who will be CEO of Motorola Mobility as a standalone business in Q1, is experiencing is exactly what RIM went through. The tremendous drive of the Curve to become America's number one smartphone--and leading device overall for at least a quarter or two--would never have happened without VZW putting both demand generation and the huge BOGO campaigns behind it.

When RIM lost priority at their number one customer many analysts hit the panic button and said RIM would have a tough time recovering. The next quarter RIM reported continued growth and everyone forgot about it. But go back and look at RIM's financial filings the past three years and a clear story emerges that this was indeed a killer for RIM--their US consumer growth stalled as a result and they have not recovered a year and a half later.

RIM's subscriber acquisition numbers have been relatively flat over the past year. Their quarter-on-quarter growth rate was a steady 15-18% for years but has been 10, 12 and 10% over the last three quarters. The percent of devices sold to new customers has plunged to 37%! I estimate their their NA growth rate has dropped from 11, to 8, to 5, to 2% the past several quarters. It's falling off the cliff. 

RIM can't change that momentum with business as usual, and neither can MOT. Two years ago $50M was a huge device launch budget. A year ago $100M was the benchmark. After Samsung's GalaxyS you could argue $150M is table stakes now. With every holiday season bringing $1 billion in combined promotion it all seems to cancel itself out and the one to make it above the noise is the hero attached to VZW's incremental commitment.

When RIM lost it's promotional hero status to Droid, it's US subscriber numbers tanked. MOT will be hit similarly hard. Both of those companies are now literally struggling for survival. Jha said Moto was working to reduce the impact of losing priority at VZW by expanding its smartphone distribution with the other Tier1 US carriers, which is fancy talk for "we'll do better at AT&T".

But that is unlikely to have any impact as AT&T doesn't follow the same advertising and promotion model. Apple is actually a proof point of this as their ad budget for iPhone has to compensate by reaching $400-500M levels. They can afford this because in their business model promoting the OS platform works across product lines, but no one else is really built that way.

With it's number one market share in the biggest smartphone market in the world, and in the biggest economy by far, I believe VZW is the most impactful catalyst in the wordwide smartphone ecosystem.

Looking at RIM September 2010 earnings as background for their Tablet

Several people have asked me what I think of RIM's new tablet. It made me curious how important this is to RIM so I went back and looked at their last earnings call a few weeks ago. Boy were there some surprises there.

First of all RIM continues to sell devices and their subscriber base is now a robust 50 million. What could be bad about that picture?

Well...

Here's the short of it. RIM is making money selling upgrade devices to existing US corporate users and selling new devices to APAC and LATA consumers. That is not a fantastic spread to try and defend and grow. 

Some specifics: Their new subs have been relatively flat over the past year. Their quarter-on-quarter growth rate was a steady 15-18% for years but has been 10, 12 and 10% over the last three quarters. The percent of devices sold to new customers has plunged to 37%! BIS (consumer) is now 67% of their base which has both good and bad elements to it. I estimate their NA base is now about 54% of all subs but their NA growth rate has dropped from 11, to 8, to 5, to 2% the past several quarters. It's falling off the cliff.

What does all this mean?

They need the tablet because in the US they have totally flatlined on enterprise growth, consumer “growth” is all upgrade sales to existing BB customers, and international is large in scale but just a following market to US. In short a huge hole in their portfolio which has to be filled from somewhere.

The challenge for RIM is twofold. On the product side, the tablet requires excellence in their historically weakest areas: A UI optimized for media consumption, web browsing, form factors beyond qwerty focused, a touch interface seamlessly integrated to all of the that.

Secondly, RIM must sell this to a declining US consumer base. And it's a base which depends upon leverage from enterprise installed base which doesn't apply to this product.

All in all I'd say this is a product unlikely to succeed.

Flagship products increasingly important to mobile vendors

The mobile industry value chain is going through some rapid shifts. Big players are choosing vertical integration in very different ways to compete.

As earnings announcements roll in across carriers and OEMs it's interesting to see how dependent the industry is overall on a flagship, high margin products. Nokia's defenders often site its dominant share in mobile handsets across regions, but look at Samsung's earnings coverage and Motorola's to see how much good high volume at low margin does you in this business:

"Hard on the heels of Motorola, Samsung announced a record second quarter, up 83% year-on-year to $3.61bn. However, despite the launch impact of its Galaxy S Android family, its first serious assault on the open smartphone sector, this was too late to affect Q2, and handsets actually weighed on the profit figure, with the surge coming mainly from memory chips and LCD screens. "

Motorola's successes were similarly dependent upon high-end flagship devices.

However, one wrinkle for Samsung is that their form of vertical integration allows them to profit in different parts of the value chain even as their mobile unit suffers from the collapse of pricing power to mid (and even formerly high-end) tier smartphones.

"Robert Yi, head of investor relations, said in a statement: "In the second quarter, our component businesses performed very strongly, yet it was a more challenging quarter for our set businesses" (phones, TVs and appliances). The smartphone boom may not deliver significant growth for Samsung's mobile unit until Q3 or later, as its Galaxy S takes hold, but it is already boosting sales of Flash memory chips, a key element in the chip unit's strong performance."

Note that while Nokia, and at a different scale and to a lesser extent RIM, still play effectively in the smartphone space by vertically integrating supply chain and distribution, their focus is to control costs and see the benefit in margin (handset ASP). Samsung abstracts this further by taking margin profit down at the component level.

For Samsung "average selling prices fell amid intense price competition, making it urgent that Samsung shifts its product balance further towards the high end. Like Nokia and unlike most other rivals, its economies of scale and broad channels enable it to compete profitably at the low end, but so far it has been a small player in smartphones. "

The most vertically integrated of all, of course, is also the most successful right now. Apple.

All vendors and providers should be planning for rapidly falling ASP and consumer-facing pricing for flagship products. Where will profit, and margin, be sustained for the different players?

Android market share continues to grow

Moconews reports that over the last quarter android market share grew at expense of RIM, Apple, Symbian, etc. This is the quarter that Android will surpass Windows Mobile for market share (at least as Comscore surveys assess it).

Market share itself is overly emphasized as a meaningful indicator but it does say some interesting things about where RIM and Apple have strengths to play to if you look at their static (and marginally declining) share amidst overall growth of smartphone adoption.

Canalys tracks Android growth, predicts 150%+

Research firm Canalys has their smartphone market share report out. They are predicting over 60 million smartphones to ship in 2010 in North America. Smartphone adoption is really accelerating--consider CTIA quoted something like 270 million active lines in the US, Canada is less than 5% of NA volume, and you have around 10% of US mobile subscribers buying smartphones in 2010.

The fastest growing platform within this growth is Android.

"Android smartphone shipments are forecast to grow to 12.3 million units this year, capturing almost 19 percent market share, up from 4.6 million units and a 9.7 percent market share last year. That puts Android's shipment growth at 169 percent. And that growth is expected to continue in the coming years: Canalys predicts 21.7 million Android smartphone shipments in 2013."

RIM and Apple are predicted to increase shipment volumes but remain relatively flat in market share as vendors pump out a wide range of new Android devices. How much does OS market share matter? Is it enough to influence current trends in developer content activity across these platforms?

In my experience the answer is no, those decisions are being made on a device level. But that's just my own world. It will be interesting to see what 2010 brings at the content and service level for these platforms.