Who's buying RIM shares? And how much could it gain this year?

[huiohuio]

Part of the problem is the definition of hardware, as I briefly discussed with brunes. When you buy an iPhone or an iPad, you're buying a combination of hardware and software. How much gets allocated to each bucket is largely an issue for the accountants and the transfer-pricing experts at the IRS, but it is innaccurate to look at the handsets or tablets as being pure 'hardware' or pure 'software' and applying the paradigms of pure hardware (or pure software) to either.

The Android vendors are obviously in quite a sweet spot, relatively speaking, because they just have to churn out 'hardware', and the software basically comes heavily as open source/free software. This is why Apple should cower in fear -- there are practically no redeeming qualities of iOS versus Android, and there's a far larger user base for Android (and its related systems including Linux) over which to spread the development effort. The $200 full-featured Android phone is a year or two away from being reality -- a $200 iPhone would run Apple basically out of the market, much like they got ran out of the PC market in the 80s and 90s with their higher cost solutions.

It's easier to think of Apple as a product company.

I'm not too sure why you say Android vendors are in a sweet spot. They're desperately trying to differentiate themselves through form factor and UI improvements, with only Samsung having had success so far. That branding and differentiation allows Samsung to go from near $0 margin to $100+.
The thing that makes it "easy" for Android vendors to churn out phones is also what makes their margins razor-thin.

Also there are plenty of advantages to an Apple-like closed system. It's the same as the Microsoft vs Apple philosophical debate

[Vitalogy80]

Part of the problem is the definition of hardware, as I briefly discussed with brunes. When you buy an iPhone or an iPad, you're buying a combination of hardware and software. How much gets allocated to each bucket is largely an issue for the accountants and the transfer-pricing experts at the IRS, but it is innaccurate to look at the handsets or tablets as being pure 'hardware' or pure 'software' and applying the paradigms of pure hardware (or pure software) to either.

The Android vendors are obviously in quite a sweet spot, relatively speaking, because they just have to churn out 'hardware', and the software basically comes heavily as open source/free software. This is why Apple should cower in fear -- there are practically no redeeming qualities of iOS versus Android, and there's a far larger user base for Android (and its related systems including Linux) over which to spread the development effort. The $200 full-featured Android phone is a year or two away from being reality -- a $200 iPhone would run Apple basically out of the market, much like they got ran out of the PC market in the 80s and 90s with their higher cost solutions.

No redeeming qualities? How about I list them...

1). Apps - every, with few exceptions, significant developer writes theirs apps for iOS first and if they have time, android. iOS has basically everyone on the same few platforms. Android has thousands of iterations to test. Also, way more revenue comes from iOS users cause android users illegally download or don't buy apps.

2). Security - android is way more open than iOS and anything goes. Security is an afterthought with android.

3). Ease of use - some people love to control everything with android and can find iOS limiting. While true, it also makes it easier to use for the non techies.

4). Reliability - apple devices have the lowest hardware failure rates of any major manufacturer.

5). Resale value - best in class.

6). Updates - want to compare the percent of users on ios6 vs jelly bean??

[Vitalogy80]

Also, as for Android makers being in a sweet spot, the only one who's making any money is Samsung...so if by being in a sweet spot, you mean losing lots of money, than yes, you're right.

[Musabbir]

This thread seems to be have transformed to a ios vs android flame war.

Well i did it guys i bought into RIM shares today. I'm really excited about what they're trying to accomplish. it's hard to compare BB10 with iOS, Android and Windows phone, but i think BB10 will be revolutionary.
from an investment standpoint, at this price ($17.74) it's still cheap (below book value, company has no long term debt, good ratios, analysts are currently upgrading their targets/ratings, stock is still about 25% shorted, but after Jan 30th, we can expect a huge reward or a big fall). Public sentiment around BB10 has been very positive, a lot of people are curious and excited about what RIM has to offer. I think RIM could be climb to $25 in the near term and possibly 40-60 in the long range forecast.

as a consumer, what do i like about BB10? i'm a very simple person. but i think 'peaking into the hub' is very cool. and their predictive typing on their keyboard is very intuitive. the phone appears to be designed to the concept of flow - ie. optimal efficiency, being able to use the phone with one thumb.

i hope they price this phone right and launch enough apps to please the masses. Thanks for reading my 2 cents.

*i am not a financial advisor, i do have a position in RIM. please consult a financial advisor before making any decisions.

I hope I could share your optimism. I am waiting to see their announcement on Jan 30 and read critics reviews of the products before I make that judgement. 25$ seems to be pushing it but if it does no complaints here. I got in at $11.
Public sentiment "now" is positive. Might still do a 360 if the the launch is anything like the playbook. They really need to be very precise with their marketing. US market is where a big portion of the money is and they need to win here first. A small penetration of 5-10% this year would go a long way.

[TripleHelix]

No redeeming qualities? How about I list them...

1). Apps - every, with few exceptions, significant developer writes theirs apps for iOS first and if they have time, android. iOS has basically everyone on the same few platforms. Android has thousands of iterations to test. Also, way more revenue comes from iOS users cause android users illegally download or don't buy apps.

2). Security - android is way more open than iOS and anything goes. Security is an afterthought with android.

3). Ease of use - some people love to control everything with android and can find iOS limiting. While true, it also makes it easier to use for the non techies.

4). Reliability - apple devices have the lowest hardware failure rates of any major manufacturer.

5). Resale value - best in class.

6). Updates - want to compare the percent of users on ios6 vs jelly bean??

Where was Siri on my iPhone 4? Updates mean nothing if the new features only apply to the flagship devices.

[Vitalogy80]

This thread seems to be have transformed to a ios vs android flame war.


I hope I could share your optimism. I am waiting to see their announcement on Jan 30 and read critics reviews of the products before I make that judgement. 25$ seems to be pushing it but if it does no complaints here. I got in at $11.
Public sentiment "now" is positive. Might still do a 360 if the the launch is anything like the playbook. They really need to be very precise with their marketing. US market is where a big portion of the money is and they need to win here first. A small penetration of 5-10% this year would go a long way.

You're right...this thread is about RIM, not Apple or Android.

But with that said, if RIM is going to turn a significant profit, which shareholders require at these prices, who are they going to steal profit share from? Apple or Samsung? What's the reason people will migrate to BB10 from either of these 2 vendors/OS's? If you can't think of a great reason, you shouldn't be investing in RIM.

[TripleHelix]

You're right...this thread is about RIM, not Apple or Android.

But with that said, if RIM is going to turn a significant profit, which shareholders require at these prices, who are they going to steal profit share from? Apple or Samsung? What's the reason people will migrate to BB10 from either of these 2 vendors/OS's? If you can't think of a great reason, you shouldn't be investing in RIM.

Physical keyboards would be one possible reason.

[Musabbir]

You're right...this thread is about RIM, not Apple or Android.

But with that said, if RIM is going to turn a significant profit, which shareholders require at these prices, who are they going to steal profit share from? Apple or Samsung? What's the reason people will migrate to BB10 from either of these 2 vendors/OS's? If you can't think of a great reason, you shouldn't be investing in RIM.

There is no doubt that RIM will face an uphill battle to gain back some of the market share. Why will people buy Blackberries instead of Iphones and Androids out there? People like choice. I am not expecting RIM to come out and dethrone any of the big players at all. I simply believe that they have the capability to take a small share of the pie and if they can, the current prices will go up. RIM shares are undervalued. If they can get a couple of the big name manufacturers such htc and samsung, then its a no brainer. If not we just wait and see....and hope.
Also the hype around IOS is decreasing. It is still a cool device and probably still is the number one smartphone device that a majority of smartphone buyers in NA will want to have if they can afford it, the wow factor is no longer there. Those who wanted it probably already have it by now and are loyal to it. May be they will take a couple of % from Android. I know a lot of people were holding of upgrading their devices. Initially thats where their sales will come from.

[huiohuio]

You're right...this thread is about RIM, not Apple or Android.

But with that said, if RIM is going to turn a significant profit, which shareholders require at these prices, who are they going to steal profit share from? Apple or Samsung? What's the reason people will migrate to BB10 from either of these 2 vendors/OS's? If you can't think of a great reason, you shouldn't be investing in RIM.

What did Nokia/MS have, for them to sell 4.5 million phones in a quarter?
If RIM did exactly that, sell 4.5 million in a quarter, would they be profitable?
Show me RIM doesn't make money with 4.5mil/quarter. Or tell me why RIM won't do at least as well as Nokia. Then we can start having a real discussion. Otherwise I call bull** on the whole "RIM needs to sell like crazy to stay alive!" idea that you seem to pushing.

[putinwork2012]

Got into another small options position for March 16. Let's see how that plays out.

[TheRed]

F is the double return of rimm in just few months....


Should've believed in rim...

[Vitalogy80]

What did Nokia/MS have, for them to sell 4.5 million phones in a quarter?
If RIM did exactly that, sell 4.5 million in a quarter, would they be profitable?
Show me RIM doesn't make money with 4.5mil/quarter. Or tell me why RIM won't do at least as well as Nokia. Then we can start having a real discussion. Otherwise I call bull** on the whole "RIM needs to sell like crazy to stay alive!" idea that you seem to pushing.

OK, I'll tell you why...their development costs might be higher than Microsoft/Nokia. Also, Microsoft doesn't need to worry about being profitable in the short term while I think RIM does...they can't lose money over the next 2 to 3 years hoping to gain traction with BB10, they need it to be an immediate success. What are they selling these 4.5 Million phones/quarter for? If they make $100/phone, will that pay for all their development, shipping, research and marketing costs?

If RIM thinks they can sell BB10 phones for the same price as the top end iPhone 5 and Samsung Galaxy S3 phones, then how many do they need to sell to make a profit? Or would it be like the Playbook where they started as the same price as the iPad but no one wanted it, so they had to quickly reduce the price and eventually had a firesale with them.

[huiohuio]

OK, I'll tell you why...their development costs might be higher than Microsoft/Nokia. Also, Microsoft doesn't need to worry about being profitable in the short term while I think RIM does...they can't lose money over the next 2 to 3 years hoping to gain traction with BB10, they need it to be an immediate success. What are they selling these 4.5 Million phones/quarter for? If they make $100/phone, will that pay for all their development, shipping, research and marketing costs?

If RIM thinks they can sell BB10 phones for the same price as the top end iPhone 5 and Samsung Galaxy S3 phones, then how many do they need to sell to make a profit? Or would it be like the Playbook where they started as the same price as the iPad but no one wanted it, so they had to quickly reduce the price and eventually had a firesale with them.

OK now we're talking.

RIM's development costs for BB10 have been absorbed for the past 2 years. Unless you think there will be a huge spike in R&D cost starting next month, let's move on.

You're right that MS doesn't need windows phone to succeed right away. That's not a valid argument for why Nokia sold 4.5mil but RIM can't. It's just stating MS' situation, which has no boosting effect on sales. Moving on.

What are they selling the phones for? Well we obviously don't know, but we can make assumptions in our calculation, and see what comes out.
We know they're not budget phones. And there are rumors they will be priced lower than $200 with contract. How about we settle on 600$?

How much do they make on the phone? Others more knowledgeable can correct me, but the i5's BoM is around $300. Shall we go with $300 BoM for the BB10 devices, then?
SG&A for 2012 was 1 billion/quarter. With their cost cutting, layoffs, etc let's assume between 750mil to 1 bil in expenses, not including cost of goods sold.
That translates to about $165-220 less margin per phone, assuming 4.5 mil phones.

So now we're left with $80-135 in profit per device. Not including marketing costs, but also not including service revenue (which should more than offset increased marketing at launch).
This also doesn't include BB7 sales (or BB7 portion of opex) or any other sources of revenue such as app sales.

$80-135 for 4.5 million phones is ~360-607 million dollars profit per quarter from device sales. $0.7-1.15 EPS per quarter. Projected forward, $2.8-4.6 EPS annually. This kind of EPS should not only support the "current high stock price", but boost it way up.

Now consider last quarter's profit from services alone was ~7-800 million, much higher than the future estimated 360-607 million from phones, and there's a chance the estimated EPS will jump even higher.

Yes these are simple/crude calculations, but we need to start somewhere. Having an actual number to play with is better than "RIM needs to sell phones like crazy!"

My theory, flawed though it may be, is that 4.5 million phones per quarter is enough to make a sizable profit that will boost stock price, even at today's level.
Now, I admit there may be huge holes in my analysis, or 4.5 million might not be realistic, and I invite you to point them out for my own benefit.

[Sonbuster]

more positive news and upgrades, this time from RBC

RBC analysts Mark Sue and Paul Treiber say they are hiking their price target from $11 to $19 because carriers around the world seem to be supporting the device, there is likely to be an attractive subsidized price of about $149 and there is a “diehard installed base” ready to upgrade to the new BlackBerry operating system.

http://www.theglobeandmail.com/globe...rticle7656724/

[Vitalogy80]

OK now we're talking.

RIM's development costs for BB10 have been absorbed for the past 2 years. Unless you think there will be a huge spike in R&D cost starting next month, let's move on.

You're right that MS doesn't need windows phone to succeed right away. That's not a valid argument for why Nokia sold 4.5mil but RIM can't. It's just stating MS' situation, which has no boosting effect on sales. Moving on.

What are they selling the phones for? Well we obviously don't know, but we can make assumptions in our calculation, and see what comes out.
We know they're not budget phones. And there are rumors they will be priced lower than $200 with contract. How about we settle on 600$?

How much do they make on the phone? Others more knowledgeable can correct me, but the i5's BoM is around $300. Shall we go with $300 BoM for the BB10 devices, then?
SG&A for 2012 was 1 billion/quarter. With their cost cutting, layoffs, etc let's assume between 750mil to 1 bil in expenses, not including cost of goods sold.
That translates to about $165-220 less margin per phone, assuming 4.5 mil phones.

So now we're left with $80-135 in profit per device. Not including marketing costs, but also not including service revenue (which should more than offset increased marketing at launch).
This also doesn't include BB7 sales (or BB7 portion of opex) or any other sources of revenue such as app sales.

$80-135 for 4.5 million phones is ~360-607 million dollars profit per quarter from device sales. $0.7-1.15 EPS per quarter. Projected forward, $2.8-4.6 EPS annually. This kind of EPS should not only support the "current high stock price", but boost it way up.

Now consider last quarter's profit from services alone was ~7-800 million, much higher than the future estimated 360-607 million from phones, and there's a chance the estimated EPS will jump even higher.

Yes these are simple/crude calculations, but we need to start somewhere. Having an actual number to play with is better than "RIM needs to sell phones like crazy!"

My theory, flawed though it may be, is that 4.5 million phones per quarter is enough to make a sizable profit that will boost stock price, even at today's level.
Now, I admit there may be huge holes in my analysis, or 4.5 million might not be realistic, and I invite you to point them out for my own benefit.

Yes, a lot of great points and honestly, I don't know much about the finances of RIM...you obviously do. There are a few things that worry me though and I think it's a gamble buying shares here. No one here has used the BB10 phones yet...what if the phone sucks? Honestly, I like Blackberry, had used one for about 5 years and would love for a Canadian Tech Company to excel, but let's be honest here...you're buying shares of RIM based on the hopes for a BB10 success. If BB10 isn't, RIM is in trouble...and if you're buying shares based on the success of something you've never used or seen before, isn't that pretty much gambling?

The other thing that worries me, and I admittedly don't know a ton about it, but weren't there rumors from the last conference call that Service Fees were changing? And that's why RIM dropped quite a bit during the last conference call on earnings?