Following a recent report from the American Physical Therapy Association that added "BlackBerry Thumb" to the list of stress ailments, my colleague Tim Beyers concluded that Research In Motion's (NASDAQ:RIMM) popular PDA holds no competitive advantage. Be that as it may, it didn't stop the company's stock from retesting all-time highs in recent trading following the release of fiscal-2007 second-quarter results.
Investors were pleased with RIM's top-line performance, which saw sales increase 34.4% year over year. Perhaps Wall Street was most pleased by the company's outlook, as CEO Jim Balsillie declared, "The second half of the fiscal year is promising to be one of the most interesting periods in our history, with the launch of exciting new products."
Using its latest quarterly earnings conference call, the focus of this edition of Fool on Call will center around recent product launches for Research In Motion, tailored to address these two objectives:
- Establishing a beachhead in the consumer market.
- Maintaining an edge in the enterprise market.
Loadin
' cannons, mate!
After the hit Pirates of the Caribbean: Curse of the Black Pearl, the new blockbuster is Research In Motion: Blessing of the BlackBerry Pearl. The company has long held a dominant position among the enterprise market, including small-business owners, corporate employees, and government workers. But not until its newest launch, the BlackBerry Pearl, has the company made a serious play for the mass consumer market. With cannons-a-blazin', the stylish and sophisticated product is enough to strike fear into the competition.
The BlackBerry Pearl 8100 falls into the increasingly saturated smartphone category, but its compact size and rich integrated feature set may have Palm (NASDAQ:PALM), Motorola (NYSE:MOT), and Nokia (NYSE:NOK) sweating. With the help of an aggressive pricing strategy offered by T-Mobile, Balsillie asserted, "We may have one of the most successful BlackBerry products ever on our hands."
Attractive pricing plans offered by carriers are seen as an integral part of Pearl's plan to achieve mass adoption. With an instant discount of $100 and a mail-in rebate of $50, T-Mobile has knocked down the price of Pearl to approximately $200. Carriers like T-Mobile are willing to take a hit up front on a hot product like this because, over the long run, BlackBerry subscribers have typically proven to be "five to six times more profitable" than a normal cellular subscriber, says Balsillie.
BlackBerry users re-up at above-average rates, Balsillie explains, and are also less susceptible to churn. RIM is finding that carriers are asking themselves whether they want a bunch of subscribers that are "500% as profitable as your average subscriber," or whether it makes more sense to drop the price a few bucks and make "350%" profit with the opportunity to further accelerate adoption rates. T-Mobile and others are moving toward the latter position.
RIM believes that, beyond its compact size and attractive pricing plans, Pearl has a seamless integration of consumer-oriented features into BlackBerry's core enterprise platform -- an advantage that really gives the new gadget a peg leg up on the competition. During the question-and-answer section of the call, Balsillie noted that despite the competition, Pearl will continue RIM's legacy by offering a product that handles both business and consumer needs equally well in "one device and one platform."
Locking down enterprise
Pearl should be an attractive option for the business-oriented, but make no mistake -- this new product is designed to attack the mass consumer market as well. However, to lock down its position in the business-specific, enterprise market, RIM introduced the Blackberry 8703e Wireless Handheld for Sprint Nextel (NYSE:S) and Verizon (NYSE:VZ) EVDO networks. Management is hopeful that new features like GPS-capabilities will lead to "strong demand" for enterprise-market customers looking for more than email and Web surfing.
In addition to new handheld entries, RIM is pursuing the business market in other ways. During the quarter, it launched a new online marketing campaign, and it unveiled BlackBerry Owners Lounge, a free service available to members. It also hopes to attract corporate types by rapidly expanding its carrier relationships. During the quarter, it added 25 new carriers, including NTT DoCoMo in Japan, bringing its total of carrier partners around the world to more than 200.
It's all fun and games until somebody loses an eye patch
After my analysis of RIM, I believe that management wasn't bluffing when it stated that Pearl is one of the most important products in the company's history. What has amounted to a lot of swashbuckling and small swordplay in the handheld market is about to get amped up to a whole different level with Pearl. Wall Street seems to be on top of this critical development, hoisting RIM's shares to near all-time highs.
While the high seas can be a dangerous place to play as an investor, the prospect of treasure has many flocking to this stock. At the very least, RIM warrants hauling out the spyglass for a closer look.
More conference-call analysis:
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Palm is a Motley Fool Stock Advisor pick. For more of David and Tom Gardner's top investing opportunities, try our flagship newsletter service free for 30 days.
Fool contributor Jeremy MacNealy has no financial interest in any company mentioned.
