Analyst Commentary

• RIM (Research in Motion) has suffered further woe this quarter, with its third consecutive loss and its lowest smartphone shipment figure for three years.
• RIM has also delayed the launch of BB10 (BlackBerry 10) smartphones to early 2013, putting further pressure onto its business.

Today we focus on three developments:

• RIM Suffers Further Losses: RIM has suffered further losses in the quarter, with revenues down 33% sequentially to USD2.8 billion, and smartphones down to its lowest figure in three years to 7.8 million (see table). The company reported its third consecutive loss, this time of USD518 million, while PlayBook shipments were of just 260,000. The carrier announced 5,000 extra job losses by the end of the year as it looks to reduce its costs, and also said that the future BB10 smartphones will only become available in early 2013 and not later this year as had been previously announced (see United States - Canada - North America: 30 March 2012: Analyst Commentary and 30 May 2012: Analyst Commentary). The company ended the quarter with 78 million users.

• Shaw Reports Quarterly Profit Increase: Shaw Communications saw its net income increase by 22% (year-on-year) y/y in the quarter, reaching 248 million Canadian dollars (USD241.23 million). Revenue was down 0.5% to CAD1.28 billion, for an overall margin of 44.4%. The carrier ended the quarter with 2.24 million basic cable customers, and 1.91 million internet customers. Shaw expects a similar performance in the following quarter as it continues rolling out its Wi-Fi network.

• Qualcomm Protects Patents: Qualcomm has restructured its business, with the main objective of protecting its patent portfolio from any future liability. The new corporate structure will feature the parent company, Qualcomm Incorporated, which includes QTL (Qualcomm Technology Licensing Division) and corporate functions, as well as most of Qualcomm's patent portfolio; and a new wholly owned subsidiary, Qualcomm Technologies, Inc. (QTI), which, along with its subsidiaries, will operate substantially all of Qualcomm's research and development activities, as well as product and services businesses, including its semiconductor business, QCT.

Our Take

The company had laid down the groundwork for a weak quarter with its business update at the end of May, but speculation about the future of the company will increase following the decision to delay once again the launch of BB10 devices until next year. RIM reported high churn in the US and lower revenues in its international markets, and has pinpointed four areas of focus going forward. These are a developmental focus on enterprise and BYOD (bring your own device), streamlining its device portfolio with fewer launches, evaluate BB10 licensing opportunities, and build on its customer base thanks to BB10. RIM expects to suffer further losses because of the BB10 delay, and while the company is looking to upgrade current customers to BB7 (BlackBerry 7) devices in the meantime, this seems unlikely to have much consumer impact as users either wait for BB10 or migrate to another manufacturer. Furthermore, RIM has seen its ASP (Average Selling Price) and hardware revenues decline as it tries to attract customers with lower prices, negatively affecting its margins.

RIM has said that it is looking at all options, with partnerships, licensing and even a spin-off of the company all being considered, and while the company still has some assets in its messaging businesses (both BlackBerry Messenger and email), but it remains to be seen whether RIM will be able to find partners in the short-term; licensing would also potentially cannibalise some of its hardware products, should BBM be available on other platforms like Android or iOS. RIM looks likely to stick with its current timetable, and see whether BB10 can have a positive impact in the market, but the examples of Nokia and Microsoft highlight that this is a very tough proposition. Unlike Nokia, RIM is not yet going through its cash reserves and has actually improved its cash flow during the quarter, but RIM is still running out of time to make a relevant impact in the market. RIM, Microsoft and Nokia always seem to be behind the curve and catching with the market leaders that are Apple, Android and Samsung, an impression exacerbated by the time between announcing a product and actually launching it, and in RIM's case it makes its chances of success even more remote. Its competitors know that BB10 is very much last-chance saloon for RIM, unless a drastic change of strategy occurs in the next six months, and they may decide to let the company fail and then pick up the juicy pieces at an attractive price, rather than enter into any kind of partnership. Microsoft could be the trump card, but it is unlikely that a partnership of two struggling platforms will have much of an effect in the market.