BlackBerry maker downgraded in light of blistering iPhone sales
Although it believes Research In Motion's dominance of the enterprise market remains secure for the time being, Needham & Co. downgraded shares of the BlackBerry maker this week, explaining that the same cannot be said for its primary growth driver of the past two years -- the consumer market.
In a report sent to clients Wednesday, the investment bank cited metrics reported by RIM each quarter which show its subscriber additions in the enterprise market to have increased 28 percent in fiscal 2008, and 31 percent in the first fiscal quarter of 2009. At the same time, however, the company's additions in the consumer segment grew nearly 300 percent and 174 percent, respectively.
Analyst Charlie Wolf explained that much of this success has come as a result of the firm's consumer-oriented BlackBerry Pearl, which was met with a paucity of competitive offerings from other smartphone manufacturers for the past seven quarters.
Although rival vendors such as Motorola, Samsung and HTC each took a stab at the Pearl's core market segment, the offerings from those companies relied on the "justifiably maligned Windows Mobile operating system" which has proven to be anything but user-friendly.
"But the days of no competition are over," Wolf told clients. "They ended with Apple’s July 11th launch of the iPhone 3G. [...] Apple announced that it sold over one million phones in just three days, [and] our checks indicate that demand has continued almost unabated since then."
Key to Apple's assault on RIM's turf are two key moves, according to the analyst. First, the iPhone maker has drawn up plans to expand distribution from just a handful of countries to approximately 70 by the end of the year. Secondly, and most critically, it's built a massive developer community that has produced around a thousand native applications in just under four months.
It's that software front, Wolf argues, that's destined to emerge as the "next battleground" in the smartphone market. RIM's "primitive" Java development tools have "no hope of catching" up with Apple's powerful and easy-to-use iPhone SDK, he says.
BlackBerry Bold, due some time in the third quarter.
Still, the analyst points out that RIM holds ambitions of fighting back "or at least attempting to." Earlier this Spring it announced the BlackBerry Bold and will launch the iPhone look-alike BlackBerry Thunder later this summer.
"In our opinion, the Bold is not even on the iPhone’s radar screen," he said. "Thunder should be. But what distinguishes the iPhone is not its pretty face. It’s the superb integration of hardware and Apple’s OS 10 operating system that makes the device one of a kind."
BlackBerry Thunder, due some time in October. | Source: Crackberry.com
Those comparisons aside, Wolf acknowledged the view of some industry watchers, who argue that Apple and RIM aren't necessarily engaged in a winner-take-all battle. With the smartphone market having posted more than 50 percent growth in 2007, it's conceivable that several firms could come out winners in the end.
"At the same time, it has quickly become obvious that the iPhone is bound to slow the red-hot growth of Blackberry Pearl and RIM’s new consumer-oriented entries," he said. "That’s why we’re downgrading RIM from a hold to an underperform rating."
In a report sent to clients Wednesday, the investment bank cited metrics reported by RIM each quarter which show its subscriber additions in the enterprise market to have increased 28 percent in fiscal 2008, and 31 percent in the first fiscal quarter of 2009. At the same time, however, the company's additions in the consumer segment grew nearly 300 percent and 174 percent, respectively.
Analyst Charlie Wolf explained that much of this success has come as a result of the firm's consumer-oriented BlackBerry Pearl, which was met with a paucity of competitive offerings from other smartphone manufacturers for the past seven quarters.
Although rival vendors such as Motorola, Samsung and HTC each took a stab at the Pearl's core market segment, the offerings from those companies relied on the "justifiably maligned Windows Mobile operating system" which has proven to be anything but user-friendly.
"But the days of no competition are over," Wolf told clients. "They ended with Apple’s July 11th launch of the iPhone 3G. [...] Apple announced that it sold over one million phones in just three days, [and] our checks indicate that demand has continued almost unabated since then."
Key to Apple's assault on RIM's turf are two key moves, according to the analyst. First, the iPhone maker has drawn up plans to expand distribution from just a handful of countries to approximately 70 by the end of the year. Secondly, and most critically, it's built a massive developer community that has produced around a thousand native applications in just under four months.
It's that software front, Wolf argues, that's destined to emerge as the "next battleground" in the smartphone market. RIM's "primitive" Java development tools have "no hope of catching" up with Apple's powerful and easy-to-use iPhone SDK, he says.
BlackBerry Bold, due some time in the third quarter.
Still, the analyst points out that RIM holds ambitions of fighting back "or at least attempting to." Earlier this Spring it announced the BlackBerry Bold and will launch the iPhone look-alike BlackBerry Thunder later this summer.
"In our opinion, the Bold is not even on the iPhone’s radar screen," he said. "Thunder should be. But what distinguishes the iPhone is not its pretty face. It’s the superb integration of hardware and Apple’s OS 10 operating system that makes the device one of a kind."
BlackBerry Thunder, due some time in October. | Source: Crackberry.com
Those comparisons aside, Wolf acknowledged the view of some industry watchers, who argue that Apple and RIM aren't necessarily engaged in a winner-take-all battle. With the smartphone market having posted more than 50 percent growth in 2007, it's conceivable that several firms could come out winners in the end.
"At the same time, it has quickly become obvious that the iPhone is bound to slow the red-hot growth of Blackberry Pearl and RIM’s new consumer-oriented entries," he said. "That’s why we’re downgrading RIM from a hold to an underperform rating."
Comments
"Oh look at me, I'm RIM and I have the Blackberry, and--"
And here's me:
"Buh-bye."
However, the stock had fallen to $102 yesterday, from ~$119 last Friday, a 14% drop. So it is still down despite today's uptick, and there's no doubt that some of this drop is attributable to the iPhone V2.
rim - ftw
rim - wtf?
100% wrong on both counts.
Apple no more 'gets' the corporate buyer than RIMM 'gets' the retail consumer. It's the same corporate buyer who buys Microsoft's wretched products because a) It's safe - everyone does it, and b) You need someone to blame when things blow. So no IT chief is going to take a mass migration risk away from Blackberries regardless of what the CEO wants. Sure, give the CEO his so you stay employed but the whole corporate staff? No way.
Plus, it's irrelevant how good the iPhone is (and it is very good) - the consumer has the simple choice to make between a new phone and bread on the table. You can eat cereal but you cannot dial it up.
Get with it, Mr. Analyst - Apple is a Consumer Discretionary stock. And rational investors are shorting those, right?
mail, book, grid, travel the world, some crazy formula, compass?
compass..as in safari/internet? wait no it must be the world icon, like world wide web!
As predominantly corporate buyers stock up on Blackberries to enhance efficiency during these tough times, this analyst concludes that consumer spending on iPhones will rise whereas corporate spending on Blackberries will fall.
100% wrong on both counts.
Apple no more 'gets' the corporate buyer than RIMM 'gets' the retail consumer. It's the same corporate buyer who buys Microsoft's wretched products because a) It's safe - everyone does it, and b) You need someone to blame when things blow. So no IT chief is going to take a mass migration risk away from Blackberries regardless of what the CEO wants. Sure, give the CEO his so you stay employed but the whole corporate staff? No way.
Plus, it's irrelevant how good the iPhone is (and it is very good) - the consumer has the simple choice to make between a new phone and bread on the table. You can eat cereal but you cannot dial it up.
Get with it, Mr. Analyst - Apple is a Consumer Discretionary stock. And rational investors are shorting those, right?
I don't know. I don't quite agree with you.
Blackberry getting the consumer market now that iPhone v.2 is out is a fool's errand, that is for sure.
But the iphone getting the enterprise market is a definite possibility. Sure there is an energy barrier due to IT staff having to do things a different way and possibly being shrunk in side since stuff doesn't go wrong all of the time when running Apple software and OS. But look at the perks: the SDK which reduces development time and cost while keeping the same safety protocols and access to more features including faster down/upload speeds.
I would say it is time for Blackberry to start thinking about plan B: switch to agriculture crops such as berries or mass producing self-sealing stembolts.
"Hello I'm an iPhone"
"Hello I'm a Blackberry"
ads.
Was the word "blistering" really needed?
Yep
As predominantly corporate buyers stock up on Blackberries to enhance efficiency during these tough times, this analyst concludes that consumer spending on iPhones will rise whereas corporate spending on Blackberries will fall.
100% wrong on both counts.
I think you got it half right / half wrong. The article said that BB's enterprise share is more secure, that the iPhone is going to take BB's consumer share. The consumer side is where BB grew the most recently, but iPhone is competing very strongly there.
Plus, it's irrelevant how good the iPhone is (and it is very good) - the consumer has the simple choice to make between a new phone and bread on the table. You can eat cereal but you cannot dial it up.
The consumer landscape is a lot more broad than that. While there are plenty of people having a tough time such that they can barely keep up with their necessities, I don't think they were necessarily Apple customers in the first place, or seriously considering an iPhone either way. I don't think those people would be in line for BlackBerry units either. Apple seems to be weathering economic difficulties so far, as I understand it, luxury brands often do pretty well despite economic conditions.
If my company forced me to get a BB, I'd find a new job. I prefer to work with people with a passion for technology, not a passion for job security. Tech companies with too many of the latter usually don't last long.
RIM is doomed...
mail, book, grid, travel the world, some crazy formula, compass?
compass..as in safari/internet? wait no it must be the world icon, like world wide web!
mail, phonebook, calendar, travel the world(that'll be fun!), media, mobile safari
What's really cool is the way it tells you "you've got mail" with that little red asterisk in a circle.
Oh my god. Is that COMIC SANS?
RIM is doomed...
Nice pick-up. I totally agree - any device that uses such an ugly typeface is in trouble. I guess it's meant to distinguish the 'consumer-oriented' Thunder from their business-oriented phones, but it's an awfully ugly typeface (I deleted it off all my computers). I've never gotten the "let's design something that looks like a third-grader drew it" kind of thinking.
Blackberry is a fantastic device and excellent for business. While I am getting an iPhone for my wife in the next week or two there is not a chance in hell I would consider replacing my BB for one. BB works brilliantly all the time, my Pearl is the best phone I have ever owned and for my business needs the iPhone will not come close at this time.
Stop with the tired old nonsense that if it aint Apple it must be crap.
iPhone will of course start to take some market share from BB, this is just natural. But as all the forecasts are predicting sales of BB's are still going to rise, the market is getting bigger, especially the consumer market, taking market share from someone does not automatically mean their sales are in decline.
The truth of the matter is that there will be far, far, far more BB's sold than iPhones over the coming years. The percentage of business's switching to BB in the next few years is going to be tiny in comparison.
I do this for a living, believe me iphone has a very long way to go before it can be considered a BlackBerry killer.
Nice pick-up. I totally agree - any device that uses such an ugly typeface is in trouble. I guess it's meant to distinguish the 'consumer-oriented' Thunder from their business-oriented phones, but it's an awfully ugly typeface (I deleted it off all my computers). I've never gotten the "let's design something that looks like a third-grader drew it" kind of thinking.
I've never understood the objection, it has always sounded like silliness to me.
iPhone is good enough for the woman but a real man needs tiny metal buttons and a tiny screen!
No sissy iPhone will ever be good enough for me!
(Cus I'm a manly MAN!)