Could the RIMM growth slowdown be a bad sign for Apple?
Filed under: Company News, Technology, Investing
When BlackBerry-maker Research In Motion Ltd. (RIMM) missed earnings on September 24, investors punished the Canadian smartphone giant by quickly selling shares off a whopping 17 percent.
While RIM management tried to paint a bright picture for future quarters, Wall Street surmised that sales growth at the red-hot maker of high-end handsets was flattening out. An equally important question now should be, does the RIM miss foreshadow a whiff by Apple (AAPL) due to slowing iPhone sales?
Such a miss could wallop Apple shares, which have risen dramatically since bottoming out last winter in the $80 range after Steve Jobs left the company to deal with pancreatic cancer. But the RIM earnings call, combined with Apple-centric events, hold out some troubling indications that the iPhone -- and Apple, in general -- could be in for tough sledding in the upcoming quarter.
To put this in context, it's important to understand why Wall Street dropped RIMM so hard. Flatter sales growth is something new to the company, which has been a tech leader for years and played a key role in the recent tech rally. Research in Motion has consistently smashed earnings and unit shipment targets for this year and shareholders have rewarded the company with soaring stock prices. Since bottoming out in March 2009 at $35 per share, RIMM had risen by 154 percent to $88 on September 23. That trajectory beat Apple and virtually all other tech stocks.
The company has also been successfully dispelling the myth that it relied too heavily on business users. Roughly 80 percent of new devices sold in the past quarter were to non-enterprise uses (meaning individuals or small businesses).
Sounds good for Apple, no? Well, maybe not. Buried deep in the earnings call transcripts were some troubling statements about carrier inventory. Traditionally, large wireless carriers build up inventory to sell during the hot and heavy holiday buying season.
This year, according to RIM management, carriers are not building up as much inventory. According to the call transcript posted by investment blog SeekingAlpha, RIM vice president of investor relations Edel Ebbs said, "Channel inventory did come down a little bit in the quarter and we are not really seeing [any indication] that carriers are looking to build and in some cases, some of them are still becoming even more lean."
Why would that be? Perhaps they are forecasting a real decline in demand for smartphones. Remember, AT&T is a big BlackBerry customer. So if they have decided to buy fewer BlackBerries, perhaps they have decided to buy fewer iPhones for their channel, as well.
A few other things could point to a slower quarter for Apple. The release of the iPhone 3Gs last quarter definitely spiked sales. However, as consumers are now taking longer to replace handsets, it's possible the secondary market demand for the 3Gs could fall below that experienced in previous quarters. Additionally, Apple sent sales of its MacBook models soaring with strong upgrades only a month before the quarter ended (I was a victim of one of those upgrades and would have much preferred a 15-inch MacBookPro with 7-hour battery life). The late-quarter spike will likely not be replicated in the current quarter.
This is not related to BlackBerry, per se, but combined with slower iPhone sales it could mean a bigger drag on Apple's numbers. Apple has a history of blowing through numbers quarter after quarter. But no winning streak can last forever. This may finally be the quarter that Apple merely hits numbers. That could hurt shares and pierce the veil of Apple infallibility.
Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or follow our green articles twitter feed (@dfgreentech).
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Reader Comments (Page 1 of 1)
9-28-2009 @ 10:56AM
Pat said...
Do you realize how Apple accounts for their Iphone? There is zero possibility of Apple reporting lower Iphone revenue this quarter. With the current quarter sales having a minor impact on GAAP numbers, the fact that last quarter was blockbuster means Apple's Iphone revenue will increase from more of the deferral moving to the current quarter. As far as raw numbers, if sales have been slow then why did Apple have so much trouble keeping phones in stock at both their own stores and carrier locations. You build a case based on zero facts. The 3GS launched the last part of last quarter in a few countries. At the CC Tim Cook said sales were exceeding expectations which might delay launches in additional countries. The delay happen so my take, don't assume RIMMs weak performance will affect Apple. The China launch on 1 Oct should give a nice bump to the Holiday quarter YOY.
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9-28-2009 @ 1:30PM
Tom said...
You said (in your blog that somehow passes for news in today's society) "So if they have decided to buy fewer BlackBerries, perhaps they have decided to buy fewer iPhones for their channel, as well."
You've lost the fact that Apple does not follow the traditional carrier supplied phone model in the U.S. Yes, AT&T sells iPhones, but the vast majority of iPhones are sold in Apple Stores or the Apple on-line store.
Frankly, who needs to go to AT&T to buy a phone that can be activated by plugging it in to a computer? I just wish we had a choice in carriers. I prefer Verizon but can't live without my iPhone. Alas, AT&T has me (for now)
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9-28-2009 @ 4:13PM
bruce said...
i just visited Turkiye and saw that those poor village youth are carrying Iphones. As well as almost everyone I saw in Paris. It is a craze.
How long will it last? as long as apple is innovative and can cut prices when necessary.
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9-28-2009 @ 8:28PM
Rosemarie said...
TO: OLYVE OYL: You have responded to my blog. I can't figure out how to get to you. Please help.
Re: Ununamployment/Buying American/Sticking Together
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9-28-2009 @ 8:31PM
Rosemarie said...
"Unemployment"!!
Reply
9-29-2009 @ 12:19AM
Typical Engadget Tech-Nerd said...
Apple iPhone sales are cutting into BlackBerry sales and nearly everyone else's, so why would Apple be affected. Apple can't keep up with iPhone demand. Apple should sell over 8 million iPhones this quarter and most of them are probably 3GS models. How can a company that's not even discounting new models and selling more smartphones than last quarter have it's share price drop. That's insane reasoning. Next quarter, China iPhone sales and accounting change. Shares will continue to rise well into early next year.
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9-29-2009 @ 3:35AM
jbelkin said...
In a word, No. RIM is trying desperately to build market share with their buy 1 get 1 free deal while apple makes up to $699 PER PHONE to the tune of 40 million phones this year. RIM's consumer satisfaction rate is about 60% of Apple's (iphone 90% satisfaction, RIM 55%) and of consumers pay full price (subsidized of course but to Apple it's 100%) whiel RIm's sales strength is to corporations where it's a selling proces and with lower budgets this yea and next ... basically it will be like the PC market, Apple has the high value margins (91% market share in the $1k plus retail market) while RIM like their PC brethern fight it out at the low end. AFTER all this time, RIm still is hopefully outclassed by Apple's technology ... outside of corporate email servers, RIM is weak. So RIm will be spending money on marketing and buying the #2 market share while Apple will soon add China to theportfolio (and Rim will never with its non Chinese keyboard while Apple's keyboard is SOFTWARE and already offering most Asian languages ... Korean coming in 6 months ...).
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