A decade after Research In Motion Ltd. introduced its first smartphone, the tribe of BlackBerry users has stopped growing.
RIM is in the midst of a long-running slump in sales, but despite that, it has still managed to sell enough devices to keep adding to the BlackBerry user base, albeit slowly. In August, 2011, RIM said it had surpassed 70 million BlackBerry subscribers worldwide; the most recent number, as of early June, was 78 million.
But this could be the week that once-phenomenal growth story finally ends. Some analysts believe the total number of BlackBerry users is now declining – or on the verge of declining – as existing customers abandon RIM in greater numbers than new customers sign up.
“This is the first quarter we are expecting zero subscriber growth – a loss in enterprise [customers] offset by a small gain in international consumer subs,” said Kris Thompson of National Bank Financial. “Starting next quarter, we see the sub base in a downward spiral with Blackberry 10 potentially slowing [the losses], but we’re not holding our breath.”
Even if RIM’s subscriber figures grow slightly when it reports second-quarter results on Thursday, observers expect little but grim news from the company over the next few months.
Before the make-or-break launch of BlackBerry 10 phones early next year, chief executive officer Thorsten Heins doesn’t have much to show investors, except glimpses of the much-delayed devices. He must also convince to developers to stick around. On Tuesday, two days before the earnings, Mr. Heins will take the stage in San Jose to encourage them to create software applications for the company’s new devices.
Everybody knows that RIM is in a tough spot. The company’s market share has collapsed, and with a withered market capitalization of less than $4-billion, takeover rumours are rife.
Ahead of the January launch of BlackBerry 10, RIM has little to do but focus its weary workforce on perfecting the new phones, slash costs and lean on the growth RIM is seeing in fast-paced emerging markets. The company could update investors on the results of a strategic review conducted with help from investment banks, but analysts are not anticipating a sale any time soon, or a radical new course of action beyond trying to license the new BlackBerry 10 operating system to other handset makers.
Faced with such a dreary situation, analysts expect few surprises on Thursday. Sameet Kanade, an analyst with Northern Securities, suggested the results would be a “non-event,” given the predictability of falling revenue, fewer devices shipped than in the last quarter, and falling prices for BlackBerrys – all numbers that reflect the market’s preference for other phones.
Analysts expect revenue to slip again to about $2.5-billion (U.S.) – from $2.8-billion in the previous quarter, and $4.2-billion in the quarter before that – and have forecast shipments of BlackBerrys to fall to between 6.5-million and 7.7-million devices.
Mike Walkley, an analyst with Canaccord Genuity who is bearish on RIM, said his research indicates that cheaper BlackBerrys are still selling well in markets such as Indonesia and the Middle East, but that RIM’s higher-end Bold and Torch models are faring poorly. Indeed, low-margin growth in international markets may be the only high point left for RIM these days, despite increased pressure in these markets from Chinese manufacturers such as Huawei Technologies selling cheap Android devices.
“With increased global smartphone competition and our belief there is a very low probability the market will support RIM’s new BB10 ecosystem, we believe RIM will ultimately need to sell the company or dramatically change its business model,” Mr. Walkley said in his note.