As Research In Motion Ltd. prepares to launch its BlackBerry 10 smartphones around the world, there is one geographic area in particular where the smartphone maker is guaranteed to see strong sales: “Other.”
RIM’s market share may have crumbled amid stiff competition from the iPhone in some developed countries, but the BlackBerry brand has remained strong in a number of volatile emerging markets such as Nigeria and Venezuela. These diverse international markets have grown to account for 65 per cent of RIM’s overall revenues. And although RIM does break out revenues for Canada, the United States and the United Kingdom, those three western regions combined are still less than an enormous category RIM simply calls “Other” – a grouping that lumps together all of Latin America, Japan, China, Southeast Asia, Africa and the Middle East.
Confused? So are investors.
The BlackBerry 10 launch on Wednesday will be as global as RIM’s business. There are events scheduled for New York, Toronto, Paris, London, Dubai and Johannesburg. In the lead-up to launch, RIM stressed that it struck relationships with 50 carriers around the world. And the company will likely launch the new BlackBerry 10 devices in faraway places such as Indonesia and other overseas markets at the same time as in the United States and Canada.
This reflects the geographic spread of RIM’s current business, which has tilted to markets in the global south where smartphone growth among emerging middle class consumers is only just beginning to take off. For that reason, it’s crucial that RIM deploys BlackBerry 10 in emerging markets quickly in order to keep the market share it has secured.
But investors and analysts say they have a hard time tracking RIM’s international sales, and they want the Waterloo, Ont.-based company to provide a better breakdown of BlackBerry sales abroad.
“To have over 50 per cent in the ‘other’ category is not good disclosure,” said Byron Capital Markets analyst Tom Astle. “Emerging markets became a bigger part of [RIM’s] business faster than they expected, perhaps because the developed markets fell off faster than they expected.”
RIM also does not give firm details about which of its wide variety of BlackBerry models are selling – and given that cheaper or older phones tend to be more popular in developing countries, the picture for investors can be confusing.
Mr. Astle, frustrated at the lack of clarity, recently set out to determine exactly where RIM’s global subscriber base of roughly 79 million is located. He was prompted to look into the matter because of the fallout from RIM’s catastrophic share losses in just one market – the U.S.
His findings are surprising. Saudi Arabia (at 7 per cent) accounts for more of RIM’s installed base than Canada (4 per cent), while the Philippines (4 per cent) has more BlackBerry users than either India (2 per cent) and Argentina (3 per cent). Mr. Astle’s point was not to be 100-per-cent accurate – he cobbled together his estimates from a variety of sources – but to show the migration of RIM’s user base away from the U.S. (22 per cent) and the U.K. (11 per cent). He simply wanted to emphasize that RIM has less exposure in these big, developed western markets, which is both bad (since these markets are lucrative) and good (since it shows that RIM’s brand is proving popular elsewhere).
RIM spokesman Nick Manning said the company complies with all laws on disclosures, and declined to comment on whether RIM plans to change how it discloses information.
RIM’s competitors offer much more information about their businesses. Finland’s Nokia Corp. itemizes separate categories for Europe, Asia-Pacific, China, Latin America and North America (which accounts for only 1 per cent of sales) and breaks out its top 10 markets at the country level, including India, Brazil, Russia and Indonesia.
Samsung Electronics and Apple Inc. also offer detailed disclosures on geographic sources of revenue. Last October, Apple chief executive officer Tim Cook took time during an earnings call with analysts to detail specific growth statistics for greater China.
In the past, RIM has been criticized for poor corporate governance, both because of its unusual co-chairman, co-CEO structure – which many felt contributed to RIM’s failure to respond to new challenges – and for a stock options backdating scandal that led to a $77-million settlement with the Ontario Securities Commission. But according to Gar Emerson, a former chairman of Rogers Communications Inc. and commentator on governance issues, RIM’s geographic disclosure is not a cause for concern.
“This is within the realm of the board and management’s business judgment, to the degree they want to disclose competitive information,” Mr. Emerson said. “It’s not a corporate governance defect as I see it.”
Some RIM executives, however, recognize that country-level insight can matter. RIM’s regional head for the Middle East and Africa, Robert Bose, described in an interview in late 2012 how the violent protests during the Arab Spring affected the company’s ability in certain markets to sell phones out of destroyed mobile phone shops. And when RIM reported third-quarter results in December, executives discussed in slightly more detail than normal the geographic breakdowns on a call with analysts. Indonesia, South Africa and Venezuela were all mentioned as strong growth areas for the company.
Readers weigh in
How important is BlackBerry 10 to the future of Research In Motion? It’s a crucial turning point for the company, say a vast majority of Globe and Mail readers who responded to a recent poll.
Asked whether BlackBerry 10 would be a “game changer” for RIM, an overwhelming 92 per cent of more than 850 respondents said yes. Even among respondents from outside of Canada, 91 per cent agreed.
“BlackBerry 10 is a game changer,” one respondent said. “Everyone who has used the product has come away impressed, even the vast majority of the tech blogosphere that was all too quick to write RIM’s epitaph.”
Not everyone was confident that the BlackBerry 10 would be enough to turn things around, however. Four per cent said the new device would hurt RIM’s chances at recovery, and 5 per cent were neutral.
“Unfortunately BB10 is too little and too late in the game for RIM,” said one respondent. “The competition has grown from Apple to Samsung. Even Apple is feeling the heat.”
Asked how they felt about RIM’s future in general, 82 per cent of respondents were optimistic, 10 per cent were pessimistic and 8 per cent were neutral.
See the full poll results and add your vote here.