Runoff from RIM’s BlackBerry Jam

By Scott Moritz, writer

Research in Motion (RIMM) dazzled analysts at its Florida investors gathering with discussion of its business plans and a hands-on demonstration of its newest BlackBerry, once called Meteor and now known as Bold.

Analysts and investors came away from the event Monday reassured about the long-range growth prospects for RIM’s brand of e-mailing smartphones. And why not? BlackBerry’s secure, simple and sleek devices have won a favored spot on the belts of millions of hard-charging professionals.

But it is the short-term cost of the growth that gave a few analysts some reason to trim expectations in the wake of the meeting. RIM is expected to spend more on research and development as well as marketing this year as it defends itself against challengers in the smartphone sector.

“Our takeaway from the capital markets day is that RIM is clearly in ‘investment mode’ as management correctly sees a tremendous opportunity to take share from traditional handset vendors,” Morgan Keegan analyst Tavis McCourt wrote in a research note Tuesday.

“This may limit margin expansion near term, but substantial revenue and earnings growth should continue as RIM expands its product line and its marketing initiatives,” McCourt continued.

And though the company didn’t offer a date when Bold would start selling in with AT&T, the presentation materials provided by RIM put meaningful sales in “late summer/fall,” according to Pacific Crest analyst James Faucette.

This is later than the June debut originally expected and it gives Apple’s (AAPL) new 3G iPhone a two-month head start. The iPhone is expected out on June 27, near the anniversary of the original phone’s coming out party.

And as Apple tries to edge iPhone into RIM’s business-users domain, BlackBerry’s room for growth is in the lower-spending consumer crowd, with its Pearl and Curve. To analysts, this means more subscribers but smaller phone bills and therefore less revenue per user, a key measure of smartphone strength.

“The company pointed to faster [average revenue per user] erosion than we have modeled and indicated the possibility that margins may not be quite as strong as we have modeled,” writes Pacific Crest’s Faucette.

The tempered expectations offer a bit of a reality check as RIM enters a challenging second half of the year.

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@ John in Montvale,

Are you saying that RIM gets the same monthly fee from a consumer use as a business user? Can you back that up with info?

If you are right, consumers are getting screwed, and RIM would actually do better on capital costs with more consumer users, considering the lower email volume through their servers.

Posted By Aaron, Chicago IL : May 20, 2008 3:56 pm

With 2 month head start, Apple’s 3G iPhones will take market shares away from RIM. And for some reason Bold release date gets delayed ….

Posted By Jim, Rotterdam, Holland : May 13, 2008 7:53 pm

Scott,

You and whatever analysts you are getting your info from are dead wrong. Neither Rim or Apple make a penny off the phone bills. They get a flat rate each month from whatever carrier activates the service. So smaller phone bills mean absolutely nothing. Also Rim makes money off of each device sold, the license that it needs to be activated on, plus most enterprise users pay for support. This company will not have a challenging second half of the year. They have just started expanding into other countries.

Posted By John, Montvale New Jersey : May 13, 2008 6:37 pm

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