jack barse

From this Reuters story:

BlackBerry maker Research In Motion Ltd.may just be in the early stages of its growth even though its wireless e-mail device is now the world’s most popular, its co-chief executive said on Monday.

Co-CEO Jim Balsillie said he believes growth prospects are strong because wireless data is by far the best way for companies to improve productivity.

“This is something we think will just be a common and necessary and revolutionary aspect of how people do business,” Balsillie told analysts at the company’s capital markets day in Orlando. “We are at such an early stage and that is the true paradox of this, that it’s been such an acceleration, we feel like it’s been such a success, and yet we’re at the very, very beginning.”

Of course, what he failed to mention is that with the settlement of the NTP suits RIM will face many, many competitors in the market, most of whom will be using RIM’s own technology against it, at least on the hardware side. RIM, as I’ve pointed out before, derives a large share of its revenue from handheld hardware; a quick read of RIM’s latest financial results press release shows that handheld sales represented 66% of revenue in FQ4 2005. So while Balsillie does his characteristic chest thumping I wonder where that revenue is growth will come from.

It might come from growth in their service income, or it might not. Services brought in 23% of revenue in FQ4 2004 but declined to 17% in FQ4 2005. Total dollar growth in service revenue was US$20.3M in absolute terms, but only 42% relative to FQ4 2004; revenue and hardware growth was 92% comparing FQ4 ‘05 to FQ4 ‘04.

ARPU also declined significantly in 2005 compared to 2004. This likely represents the higher amounts that the carriers are keeping for themselves rather than a lower price in the market; again, carriers have other options for wireless email than BlackBerry. Assuming that RIM’s revenue percentages held relatively constant during the fiscal year they realized about $137.6M in services revenue in FY 2004. They closed the year with 1.069M subscribers, so a quick calculation shows ARPU at just under $128/year. In fiscal 2005 they booked $229.5M in service revenue and finished the year with 2.51M subs. Thus ARPU in 2005 dropped to $91.46. In a pure cellular world that sort of drop would be cause for panic and many resumés on the street.

Licensing revenue rose appreciably in Q4 2005, though. It represented 14% of Q4 revenues, up from 8% in Q4 2004. In total dollars licensing revenue grew nearly $40M. Still, though, it’ll have to continue this fast growth to make up for lost hardware revenue and slowing growth in service revenue.

Oh, and I have to point out one final bit. Balsillie also said this:

“The subscriber growth has doubled, and it’s really growing outside of North America. We’re really seeing the adoption, particularly in Europe. Europe was a tougher nut to crack, mainly because it’s one economic zone, but you have fragmented carriers…and it required a lot of localization for each language.”

Ahem. Jim, Europe was a tough nut to crack because the GPRS implementations sucked. Those early versions of BlackBerry on GSM/GPRS just didn’t work very well until the carriers got around to spending more money on their infrastructures. And it’s not growing as fast in North America because BlackBerry performance on cellular can’t compare to performance on Mobitex. And you haven’t invested in new Mobitex hardware to speak of, so you’ve pretty much traded growth here for growth elsewhere. Stop whining.