The Guardian
trending topics
Close Box

Our news

Yes, it’s true: We are joining GigaOM...


Investors Divided On RIM’s Consumer Push

  • Comments Comments (View)
  • Text Size: A A

image Is RIM’s push into the consumer space coming at too high a cost? The BlackBerry maker has been aggressively courting consumers, reaching out to them with TV ads, developing new software, and rolling out more consumer-friendly devices, such as the touch-screen Storm. At CTIA, its expected to unveil a variety of consumer-oriented offerings, including a full-length TV service.

SEE ALSO: Report: RIM Planning To Launch Full-Length TV Service

Despite an increase in its share of the smartphone market—up to 19.5 percent in the last three months of 2008, from 10.9 percent a year earlier—these efforts, notes the WSJ.com, have taken a toll on RIM’s gross profit margins, which have shrunk to 40 percent, down from 50 percent in the last six months. They’ve also helped knock RIM’s share price down a third from its July 2008 high of $147 per share.

In an investor call last fall, Co-Chief Executive Jim Balsillie called RIM’s strategy a “land grab” and that the company was looking for long-term gain with it. He said of their consumer push, “So we could have a sweeter margin for a couple of quarters and we might not torque the growth quite as much and then we will rue that for the next 20 years, that we gave up the key land for a little bit of interim gratification.”

But investors remain divided on how RIM’s consumer drive will pan out and are looking at its next earnings report out this week for signs that margin erosion has stabilized. Munder Capital Management portfolio manager Ken Smith, whose firm holds 111,000 RIM (NSDQ: RIMM) shares, said despite the pressure on margins, he thinks RIM is still a “long-time winner.”

FirstHand Capital Management Kevin Landis, however, thinks otherwise, noting that it has “been a great success story in terms of getting a feverish niche to adopt it, but that’s a different success story to Apple’s, which has been a game changer.” DeutscheBank analyst Brian Modoff, which has had a sell rating on the shares since September doesn’t believe RIM can pull it off either. “They have to keep running to keep up with changes in consumer tastes and risk missing numbers if their products do not hit,” he said. In February, RIM warned investors that fourth quarter earnings and gross margins were expected to be in the “low end” of its previous forecasts.

Mar 30, 2009 8:30 AM ET

Posted In: Companies, RIM

(Page 1 of 1)


The Bestsellers

From iTunes and YouTube to Facebook and Kindle, the most popular content on the web, free and paid.

YouTube Videos YouTube Videos
1. Woolly Mammoth found alive in Siberia?
2. Facebook Parenting: For the troubled…
3. Bugatti Veryon High Speed Runs x7
4. 2011 TEDxManhattan Fellow: Stefani…
5. 'Woolly Mammoth' spotted in Siberia?
See The Other Bestsellers »

Jobs RSS Job Listings

Social Standing

Which media brands are getting a lift from Tweeters and bloggers right now -- and which are getting panned?

"Sentiment" Scores for All the Companies »

Sponsors

Staff