There was some recent news on RIM getting heavier into corporate services and starting to provide security solutions for Android / Iphone.
I read a few different notes on how this might go for RIM – some liking it and some hating it.
I had a different take – a purely hypothetical scenario that I wanted to share here.
As a caveat – please do not take anything I mention here as any type of investment advice. This is just some thoughts that are coming out of my head.
Who benefits most from this?
I think the biggest beneficiaries from this would be IPhone and Android manufacturers – and not RIM. Over the last few years, RIMs customer base in the developed world has been shrunk to just the corporate customers. There might be some here and there – but basically those are few and far between. Also – an exceedingly large number of those people who are forced to carry a company Blackberry have started carrying 2 phones now – one BB and one IPhone / Android phone. Once BB offers a solid security solution for IPhone / Android, which basically means that firms that oly offer BB to their employees no longer have to do that.
So – in the first round, all the folks who carry 2 phones drop their BBs. In the 2nd round – all the folks who only have BB drop their BB when their contract expires. Within 2 years of BB launching this service, the total number of BB phones on the market can go down drastically.
On the other hand, as firms move to a device independent security platform, employee choice rules and the biggest beneficiaries from that are Apple / HTC / Samsung / Google (Motorola).
What happens to RIM then?
Well – that is the big question. Why will RIM launch a service that bleeds them to death – as if they are not bleeding enough? I think this launch marks a very important inflection point in the history of RIM – if they survive the next few years.
This will be the pivotal service that transforms their business model from a device manufacturer to a service provider. Over the period of next few years – you may see that RIM’s doings have significantly reduced the device driven revenue but may end up increasing services driven revenue. Now – that may look like a bad thing. Instead of a $500 phone, you end up selling some service. There is no way you can end up charging 500 over a period of 2 years as the service that RIM intends to provide. It turns out to approx $21 per month.
Then – why would they do that. One thing to note is that the margins on such services may end up being twice that of device margins (save Apple of course). Also – the universe that they target now expands significantly. More and more companies have started moving to device independent strategies already. If RIM can offer them a solution to get back to the same or higher level of security, they might just come back to RIM.
And all said and done – do they have another option???
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