RIM: bear case, bull case

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Bear case
RIM (Nasdaq: RIMM) missed both top line and bottom line in Q1, and issued not so strong outlook for Q2. Read news from Reuters for more details. Q1 revenue is $2.24 b vs. expected $2.27 b; earning was $0.84 vs. 0.85. While I think missing of bottom line is understandable because of spending in R&D, the revenue miss is not because its competitor iPhone was sold out going into the end of quarter.

Competition from iPhone will intensify. New 3G iPhone will be launched on July 11, and it is deceptively priced at $199. The reason I said “deceptively” is the real owner cost is much higher (see Christopher Null, How the half-price iPhone 3G actually costs you more).

Note RIM has dependent greatly on North America market: in Q4 fiscal 08 conference call: “The percentage of subscriber account base outside North America was approximately 33% at the end of the quarter”. With the softening US economy, the smartphone spending from business and consumer is likely to slow.

Bull case
Continue to innovate, sign up new partners (remember MSFT and its eco-system). Quote conference call June 25:

Partnership (James L. Balsillie)
In addition to large software companies such as SAP, IBM, and Microsoft, RIM is committed to supporting our ecosystem of smaller application development partners.

By using WiFi enabled BlackBerry smartphones and secure Cisco WiFi and IP PBX in the office, Vodafone Business One customers and use their BlackBerry smartphones to make calls within the office zone at fixed line rates, while making calls outside the office via the Vodafone mobile network. This offering will be brought to market by Vodafone Australia later this year and we anticipate further expansion across other geographies.

Outlook (Edel Ebbs)
We are forecasting revenue for the second quarter of fiscal 2009 to be higher than Q1 in the range of $2.55 billion to $2.65 billion. We expect hardware shipments to be over 6 million units and an ASP of around $349.

We are targeting net subscriber account additions for Q2 of approximately 2.6 million.

conferece call April 2:

In addition, Alcatel-Lucent recently announced its plans to develop and distribute a prepaid solution for the BlackBerry platform. This real time solution will integrated into existing carrier networks and will enable customers to track their minutes and data use against the amount remaining and easily refill the account when necessary. We believe a prepaid option will add significant value to our carrier partners and further broaden customer interest in the BlackBerry platform especially in emerging markets.

At Lotusphere 2008 we showcased some of the new BlackBerry platform enhancements for BES 4.1.5. Users will be able to edit Microsoft Word, PowerPoint and Excel files directly on their devices as a result of integrating documents to go by database. In addition, users will be able to use remote email search to retrieve messages no longer stored on the device. They will be able do busy calendar look ups to check the availability of colleagues before putting together a meeting request and advanced enterprise instant messaging to improve address book integration, to perform IM to click to calls and convert IM sessions to calls.

Disclosure: I sold my RIMM shares today, wait to buy them back at lower price.

(Update) Barrons Eric Savitz had a nice summary of analysts views on RIMM. My friend StrengthTrader speculates on the future of RIM (in Chinese).

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