RIM officials have said the company will be ‘evolving’ its business model and service offerings with the arrival of BlackBerry 10, spurring a 20 percent drop in the company’s share price
During Research In Motion’s 20 December earnings call, officials announced that with the arrival of the long-awaited BlackBerry 10 mobile platform they will make changes to the company’s service revenue model.
The changes will reflect customers’ different usage models, said chief executive Thorsten Heins (pictured), and RIM plans to offer a “range of security, mobile device and application management services in addition to communication services”. During RIM’s fiscal 2013 third quarter, services accounted for 36 percent of its $2.7 billion (£1.7bn) in revenue.
Business model ‘evolution’
Heins went on to explain: “I want to be very clear on this. Service revenues are not going away, but our business model and service offerings are going to evolve. Our vision is to position BlackBerry as the clear leader in the enterprise mobility market. While the mix and level of service fees revenue will change going forward, and will be under pressure over the next year during this transition, we are targeting to grow service revenue in smartphones, tablets and embedded application to a new offering with new partners and across platforms other than BlackBerry 10. We’re making these changes to meet the competitive dynamics of the marketplace, but more importantly to allow us to pursue the broad opportunities in mobile computing that BlackBerry 10 and our infrastructure enables us to do.
“We feel our strategy will have broadened the BlackBerry ecosystem over time and will allow application developers and other potential partners access to a broader subscriber market. This is an exciting time for our company. Yes, it’s challenging, too, and there are many things we continue to work on in execution. But we believe the company has stabilised and will turn the corner in the next year.”
During the question-and-answer portion of the call, when pressed about specific changes to the fee structure, Paul Carpino, RIM’s vice president of investor relations, said the company isn’t providing details at this point but will when it starts to launch some of the new services.
The day after the call, RIM’s shares fell by more than 20 percent, Reuters reported, “on fears that a new fee structure for its high-margin services segment could put pressure on the business that has set the company apart from its competitors”.
Reuters added that shares were still more than 80 percent higher than the annual low they fell to in September.
While RIM’s results for the quarter exceeded Wall Street’s expectations – it sold 255,000 PlayBooks and 6.9 million BlackBerry handsets, and posted a loss of 22 cents per share, versus the expected 35 cents – analysts with Canaccord Genuity, in a 20 December research note, advised investors to sell.
“While the launch of BB10 should increase RIM’s sales and potentially reduce operating losses near term, we do not believe BB10 smartphone sales can return RIM to sustainable profitability, given pressures to RIM’s international business and services [average revenues per user],” wrote analyst T. Michael Walkley.
He added, “While we believe BB10 is a dramatically improved user experience versus BB7 and RIM’s new hardware is more competitive with higher-end smartphones, our work does not indicate the consumer pull, carrier push or developer excitement necessary for BlackBerry 10 to reverse the challenging trends faced by RIM in order to return the company to sustained profitability.”
Do you know all about public sector IT – the triumph and the tragedy? Take our quiz!
Originally published on eWeek.