RIM’s fiscal Q3 2009 statement has been filed and the investor conference call is about to begin. Join in as we liveblog the hell out of it.
5:07 — sorry guys, just got in. Blame RealPlayer. Jim Balsillie is talking about the delay in Q3 launches. Sales of devices split half-and-half between new buyers and upgrades. 45% of RIM’s user base now non-enterprise (wow, did I hear that right?)
5:08 — BlackBerry Storm launch is exceptional, initial shipments sold out on launch, RIM did not suspect such a demand. Vodafone estimated they sold a Storm every 13 seconds over launch weekend. 75% in US Storm sales going to new customers.
5:10 — Talking about AT&T Bold launch and the mid-quarter Pearl Flip launch. Pearl Flip selling particularly well on Rogers at $49.99 price point. Sprint also saw a huge response to the BlackBerry Curve 8530i launch… Keeping up with all the recent BlackBerry launches is impossible. Suffice it to say, RIM launched a TON of devices on a TON of carriers.
5:14 — Prepaid market and ‘BlackBerry in a Box’ initiative showing great growth in Latin America and Asia. RIM has 10 carriers now selling pre-paid BlackBerrys.
5:17 — Jim is now rolling through all the press releases from the BlackBerry Developer Conference. Nothing new here: BIS-B push, Web Signals, new developer tool support… Expect more about some of this stuff on BBCool tomorrow (you heard it here first)!
5:18 — Just mentioned the purchase of Chalk and their ‘pushcast’ media application. A nice fit for RIM long term, but Chalk’s player needs a lot of work on the front end, and a way to make it viable for the average consumer.
5:19 — Jim is talking the BlackBerry Application Store, says that RIM has already received application submissions. From what I’ve heard, they only recently decided to build it internally as opposed to contracting it out. No one knows what it will look like. Keep your fingers crossed.
5:22 — Jim has passed the conch over, and we’re talking revenue numbers now. You can see all of this in the Q3 press release I’ve already posted. At a glance, the basic result is that RIM met their lowered targets, and the downturn in worldwide economy/lowered US dollar really hurt them.
5:27 — Now the good stuff, outlook for Q4. Fiscal 2009 Q4 3.3-3.5 billion in revenue, significantly higher than Q3. Hardware shipments to be 7.5-8 million units. Expecting large shipments of Bold, 8900 Curve and iDEN 8350i, as well as Storm. Forecasting a seasonal rundown of net subscribers…
Projecting Gross margins 40-41%, much better than previously projected, as margin from new handsets have improved quicker than expected… R&D increasing 2%, sales and marketing increasing 11%… OPEX will likely decrease…
5:32 — Back to Jim. Entering Q4 on a strong Black Friday and holiday. Formal comments over, and we’re opening up for questions.
First Question… Clarifying guidance… Normal seasonal stepdown from end of december, and a bigger pick up around February?
A: February, expecting it to still be a good bit slower than December, but the run-rate will be higher in January as Valentine’s Day promotions kick in. JIM: we have a high percentage of supporters already booked in Q4 because of extended orders for the hot products. I.e., RIM couldn’t ship in Q3, so a bunch of sales will actually kick in early January.
Second Question.. How long does the VZW/Voda hero agreement extend?
A: Extending well throughout Q4 and there are ways to extend that as we’re in the early innings on it. Interest in the Storm has been so high…
Really good news that RIM has been able to manage margins on new devices as that was a major concern during last quarter’s conference call, and will serve them well even as the worldwide economy tanks.
Third Question… What are the geographic differences in pricing…
Jim: Adoption of new products was stronger than expected, which is a very very good trend. But it shifts the margin structure, where as usually you have a quarter to work that in. The margin structure shifted because of the new products, we don’t have any volume discounts built in right now.
Fouth Question… Expectations on monthly service revenue… New low ends on ranges as volumes pick up?
A: Depends on the time frame… we’re not anywhere near the low ends on those buckets today. Trending as we’ve seen, and no curveballs due to new commitments with carriers.
Fifth Question… More on the gross margin line… Let’s break it down… Is hardware margin more responsible for the big decline in blended gross margin?
A: We don’t break it down that specifically, but hardware did have an effect on the blended
Q: Why are you saying you can get the margins up on time if you’re projecting flat in 2010.
Jim: You’re comments are really fair, and we’re in a time of great upheaval in the worldwide economy… We have very good visibility into our top lineup for Q4. We’re projecting a very high comfort level for our top lineup, as we’re not really launching any new products next quarter.
As I said last time, we’re in very much of a land-grab phase right now. Traditionally we’ve always been able to get costs down. And we’re working on new revenue streams to supplement (ie. app store). We’re very strong and stable, our products our loved going forward, but we’re so much in flux right now that we’re not going to give you anything until we can give it to you with clarity. I’m not going to give you false clarity. Despite the times, the team feels remarkably good about where we’re going right now.
Sixth question… followup on the products… Storm… When can we expect a product like that to end up on something other than Verizon and Vodafone? What was the shortfall in subscribers and revenue attributed to?
Jim: shortfall in subscribers attributed about half and half to economy and delay in new products, the revenue was mostly the delay. When you lose 2-4 weeks on an adoption curve, you lose a fair bit of volume… I would give a disproportion of the weighting to the delay in products. The sub delay in October was weird but picked up very nicely.
Don’t forget the Sprint 8350i, which we’re delighted about, or the Bold. Remember the BlackBerry is a platform, and if you knew the roadmap, you’d see a rich roadmap for 09-10 that will blow you away. Even in this economic environment, there are sector specific catalysts that we can control… I.e. we can charge a little more for devices, but customers want them loaded with applications and services.
Jim: won’t talk about Storm or Storm-like product on anything other than Verizon and Voda. But each carrier is coming out with very special roadmaps. And you’re going to see a remarkable cycle riding into the autumn of next year.
Seventh question… where is CAPEX going mostly to?
A: Primarily to facilities… Somewhat to IT, but mostly fascilities… But won’t seeing it drop in a major way… (Especially as RIM seems to be continuously in a hiring phase).
Q: How does the 3G product line affect this?
Jim: These 3G products are remarkably expensive to make.
Q: other vendors don’t talk about lowered 3G margins…
Jim: We’re in a high-end segment and we got true leadership on that front.
FINAL QUESTION… What percentage of units are from new products….
Jim: A lot of the new products came later in the quarter… Have to remember the Curve is still the number one seller in the United States.
Q: I’m trying to understand if users are using the new devices differently that are letting the carriers drive ARPU.
Jim: My dealings with carriers is that they like making more money per user, but they like making deeper penetration of voice data. Cutting over the BlackBerry to mainstream. The Storm is an obvious catalyst for this. Although people are saying “I carry an internet device on my belt, a multimedia device on my belt, a social networking app on my belt.”
We are in a rapid evolution. One thing we’ve seen is the dramatic evolution of mobile social networking (see 1 million MySpace for BlackBerry downloads in a month). No question that carriers will be a services platform and that the BlackBerry will be the principal medium to consume their media. We’re heading into new realms here. New models, new mediums. We have complimentary new revenue streams to that and we’re a leader. And that’s what we’re certain about. I’m not trying to give you false clarity; but we have certain foundation points that are unmovable. That’s just what I can talk to you about.
That’s it! Remember, you can listen to a recording of the call at http://www.rim.com/investors/