ANALYSIS: RIM Q1 Results Are Horrid - Blackberry in Tailspin

We start the Smartphone Bloodbath Year 3: Digital Jamboree. First company out the gate is RIM, the maker of the Blackberry and their first quarter results. Fourth Quarter results looked like Blackberry had gotten its mojo back, growing 33% from the third quarter (slightly faster than the industry even) and looked like its market share had stabilized at 9%, down from its peak of 21% back in 3Q 2009. It has been a steady decline since.

By the first quarter of 2010 Blackberry had 18% of the global market. A year later (1Q 2011) RIM was down to 14%. For the calendar first quarter of 2012 - RIM sold 11.1 million smartphones, and that is about 7% market share.

First a quick note to the smartphone stats. I am modeling a 3% rise in smartphone shipments (4Q'11 to 1Q'12) fuelled by the Chinese New Year sales which was two weeks earlier than usual - I am projecting 160 million smartphones shipped. We will not know the actual number as per usual, until each of the big 4 handset industry analyst houses report (Gartner, IDC, Canalys and Strategy Analytics). Their numbers are expected around first week of April.

BLACKBERRY OVER THE CLIFF

Secondly, obviously, Blackberry's temporary stabilization turns out to have been an illusion. The sales of Blackberries for Christmas was maybe some corporate/enterprise customers using some end-of-year budgets to replenish handsets, and in some markets parents buying Blackberries for their kids as Christmas presents. But since then, the BB sales have fallen off a cliff. In fact, if you liked my hypothesis of The Cliff Theory of how handset makers die, now Blackberry's one year performance fits dangerously the pattern identified in The Cliff. RIM's market share dropped by 50% over a 12 month period. While my theory has so far only looked at annual sales numbers, not quarterly sales numbers, this is nonetheless a very dangerous sign for RIM.

The other part my theory of The Cliff suggests, is that in the desperate moves a handset maker tries to recover, it will inevitably go from making profits to making losses. That has just now happened also at RIM, they reported their first quarterly loss. This is VERY bad news and promises VERY bad coming months. The company is in a tailspin.


RIM Blackberry P9981 by Porsche Design - Is this $2000 phone a profitable project for RIM or just a vanity product?

Consider. Just one year ago, for the full year 2010, RIM was the world's second largest smartphone manufacturer (by units shipped). RIM sold 48 million Blackberries vs. third place Apple with 47.5 million iPhones. RIM had grown 39% in size from the year before and was very profitable. Last year 2011 that growth stalled to only 9%, and RIM fell from 2nd biggest smartphone maker to fourth, with 11% market share. Now compared first quarter 2012 to the same period in 2011, RIM's actual shipment number is down! Blackberry global shipments are down 23% in one year while the industry itself grew 63% in the same period.

Obviously, the true danger-sign that all bets are now off at RIM, is when a profit-generating smartphone maker turns into a loss-maker. This is arguably the beginning of the end. If 'The Cliff' theory holds, RIM will fall to 3.5% size over the next 12 months (or worse) and will be gone from the market as an independent smartphone maker within 24 months. Could be much faster, as we heard already from the new management at RIM that they are seeking partners (read: trying to sell the company, or parts of the company, or get an investor or partner).