That’s right, I may be stuck in Montreal, but that won’t stop me from live blogging the heck out of RIM’s Investor Conference Call!!!
4:57 They’ve been playing really cheesy music for about 10 mins now, but I’m at the House of Reggae in MTL, so everything’s chillaxed on my end.
4:58 About to start any minute now. I was blogging so fast I didn’t even get to look at the numbers. Thoughts people?
5:00 Going to throw some of the numbers in here:
Revenue for the second quarter of fiscal 2009 was $2.58 billion, up 15% from $2.24 billion in the previous quarter and up 88% from $1.37 billion in the same quarter of last year. The revenue breakdown for the quarter was approximately 82% for devices, 13% for service, 3% for software and 2% for other revenue. During the quarter, RIM shipped approximately 6.1 million devices.
Approximately 2.6 million net new BlackBerry® subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 19 million.
5:01 About to start!! Listen only now, and then they’ll open it up for questions afterwards. Conference call is being recorded for those who miss it.
Edel Ebbs, VP of Investor Relations is handling things right now, with Jim Balsillie to provide a strategic update.
5:02 Blah blah blah, talking about the language they’re going to use. Get to the good stuff!! We want the Jim Dog!!
5:04 – Balsillie on the line! Excited about revenue 2.58 billion, up 88% from last year! Added 2.5 million subs, 19 million total in q2. 400 carrier distribution partners around the world
BlackBerry bold launched by 60 carriers in 29 countries. Bolds split roughly even between enterprise and consumers. Initial release was mostly new purchases, but now evening out with device upgrades.
Looking towards US launch in near future. Ha!
5:06 Talking about the FlipBerry, BlackBerry Pearl Flip. Giving it hype, but we’ll see how it sells. I know I’d rather use a Javelin, but my little sister would kill for a FlipBerry.
5:07 Giving some love to the BlackBerry 8350i. First iDen BlackBerry in a very long time!! Get it now Sprint subscribers.
Tons of products coming out this fall, but Verizon and Telus sold record numbers of the CDMA 8330 in new colors in Q2.
So new colors are a really good way to make sales. Look out for the Alltel white 8130.
5:09 Latin America a strong region for RIM. BlackBerry Bold launched in 20 carriers in Latin America, Jim Dog expecting momentum to carry in fall.
T-Mobile Germany saw high uptake on unique pricing on Pearl and Curve (10 Euros?).
Wow, Jim just went voice of God echo. It’s pretty trippy. I didn’t know he’s THAT powerful!
5:09 Bold did well in Hong Kong, and Australia. We get it Jim, you are now an international company, and now release more than two devices per year. Where’s my paisley pink Bold?
More prepaid plans in Q2 for India, it’s going to be a huge growth market for RIM. Same for TIM in Italy and Latin America. Jim expects prepaid to become a larger part of RIM’s business.
Also, Walmart and RadioShack, Back to School promotions are new indirect sales methods that worked well for RIM.
5:13 Curves and Pearls will be available in most non-carrier retail environments by the end of the year. I wonder if they’ll start selling them at Starbucks….
5:14 Talking about ICQ, AIM, and AOL mail as native apps now, as well as the other IM clients that are now native. Forget email, IM is the new thing! BlackBerry the only major platform that supports all 5 major IM clients. What about native Twitter?
5:15 Social networks…. 2.5 million downloads for their facebook app…. Announced partnership with MySpace during CTIA, probably will be forced onto users by carriers like the facebook app… Where’s my LinkedIn app???
5:16 BlackBerry is now the official smartphone of TicketMaster, with cook integration for previewing music and the BlackBerry Wallet application.
Also, you can now TiVo from your BlackBerry! Sweet!
5:17 Enterprise stuff, just announced support for Microsoft Messaging (you heard it here first last week folks). Also working closely with SAP and seamless integration.
5:18 BlackBerry Mobile Voice System adopted during Q2 (we posted a Sprint announcement last week too). It’s all about PBX on your BlackBerry now, but honestly, I only use my BB for text communication.
5:20 BlackBerry now one of the top 100 global brands, debuting at 73.
Shift in the global phone market. Growth has stagnated…. One day all mobile phones will be smartphones. RIM has 54% NA marketshare in Q2. The time to aggressively attack adoption.
New hardware platforms (cough, Storm, cough) has higher associated costs, like the Bold. But Pearl Flip has a cost structure similar to Curve and Pearl. So essentially, Pearl Flip will make up for the added costs RIM has to eat on the Storm and Bold.
Jim believes there is some cost recovery on these new devices, however, due to scaling, and the scaling of the installed base due to higher margin revenue streams.
5:22 Call turned over to Brian to revue Q2 results…. Handheld devices rep. 82% of RIM’s Q2 revenue…
Approx. 4.8 million devices activated in Q2, both new devices and upgrades… Service revenue was 13% for the quarter. ARPU declined slightly from the quarter….
Gross margin 50.7%, in line with expenses. Operating margin increased 23%, slightly less than expected…
Unfavorable impact of American dollar depreciation had some negative affects…
Whew, hard to keep up. All this is in the release, so I’m going to chill a bit and focus on the big stuff.
Generated 163 million in cash… Capital asset additions were $425 million dollars…
5:26 Income on hand 513 million dollars….
Call being handed back over to Edelle for Q3 guidance.
5:28 2.95 billion to 3.15 billion
Product launches for early Q3 have been pushed back, some have been pushed to straddle Q3 and Q4. Slip of Blackberry Bold and other devices could push positive results into Q4 as well…
Saw very strong Novembers last year, similar numbers this year… Strong replacement sales for Bold as well as phone only sales for Pearl Flip.
2.9 million sales growth is dependent on no more devices slipping…
5:29 Weak US dollar hurting growth margin…
Beyond Q3, growth earning margin in the low 40%…. Expect total operating cost to increase 11-12% from Q2… Investing heavily in R&D and advertising…
Cappex to be 250 mill in Q3. Investor income due to 30 mill in Q3… Tax rate to be 29-30%, but decrease in 2009…
5:32 “Time of tremendous opportunity for RIM to grow share in the global smartphone market.” — Jim
Now opening up for questions…
Sounds like past quarter and current quarter very promotion heavy. Why wouldn’t we expect to see some seasonality after that, once the promotion dies down?
Jim: A lot of currents at play in the market right now… Surge during Black Friday last year and very strong flow into the new year… Pretty unexpected… If all these hero programs take the traction we think, all this will carry through… If you’re talking about the Spring, it’s getting out of our visibility, because the smartphone is displacing the common phone.
Our view is that it’s really a time for adoption. And we have such a rapid product cycle.. And you haven’t seen all the announcements and they’re all coming mid-quarter… Shifts numbers… We see some very exciting high margin revenue strategies to come out of this… Exciting, dynamic, high growth!
Beyond that, the nuancing of tweaks in the model and the seasonality is not in our heads. It’s about driving these hero campaigns… We’ve never introduced so many products so fast. But we are the market share leader and you have to extend and drive the adoption all the way.
Talk about expectations for having phones like the Pearl Flip hit the pre-paid phone market… Not many carriers offering BlackBerry data on the prepaid SIM market. Will that change?
Jim: We’re working on prepaid plans for data. The key thing for the carriers is to create a platform relationship with data services to their customers. The prepaid voice thing isn’t as strategic.
Pretty soon I think that all phones will be smartphones, so data might be there, but sold latent (to be activated I guess as they move from prepaid).
There has been more interest in prepaid data than prepaid voice. getting data into a prepaid model is becoming a big, big part of what we’re doing.
Is there a shift in the competitive or market landscape? Is there more marketing involved or can you no longer pass off new platform costs?
Jim: It’s pretty normal when we introduce new products, but the key is that we’ve never introduced so many products at once. But we’ve never been put in so many hero campaigns, where we’re the only device featured for the season.
I wouldn’t put it to a competitive thing, it’s new products and new hero campaigns. Wait 30 days when you see these campaigns; it’s like nothing you’ve ever seen before. And if they put their shoulders into it, we got to meet them a bit on the costs. We’re just simply positioning for greater adoption. This isn’t just smartphone vs. smartphone: some of it’s smartphone versus legacy.
And there are some surprises: some you know about and some you don’t. (WHOOBOY, that’s interesting)
Then why won’t these pressures alleviate over the next 3 quarters?
Adelle: We have a lot of products launching on the same product platform that have a higher cost (except the Pearl Flip). And we’re expecting a lot of adoption for those products.
Balsillie: We’re in a land grab situation, and it’s hard to get perspective a couple of quarters from that. But we’re unambiguous about our growth. Strategically, running this country, it’s all about adoption right now. (hmm) There’s a turbo charging and a massive disruption going on in a major way if it’s played properly.
Exactly how the model plays out…. If we’re there, great, but if we give up ground for short term gratification, that’s just not in the best interest of our shareholders. It’s just not.
Why isn’t the volume there?
Jim: These devices are launching mid-quarter. Also, I blink and we’re on 400 carriers now. It wasn’t too long ago it was 25… We’re Balancing so many things and we’re balancing them exceptionally.
If there is one thing we could do if we had more latitude would be to invest more.
As long as the company holds it’s leadership position as smartphones go to mass adoption… You look to CTIA, and you see that these things are doing a lot more things a lot faster than anyone ever expected.
I’m not going to knowingly avoid that growth, when our leadership position is worth MORE now because of it.