Revisiting RIM: Are the enterprise storm clouds brewing?
Research in Motion's gravy train---the enterprise---may be slowing as companies cut back corporate data plans and rethink what employees should get BlackBerry devices.
Anecdotal accounts are filtering into us that many employees, particularly the IT variety, are losing their BlackBerry phones. Why? Companies can't justify paying for employee data plans. And the BlackBerry Enterprise Service just isn't adding up for firms looking to cut costs.
Simply put, anyone not in the managerial chain that has a BlackBerry may be at risk to lose it. These phones are being replaced with corporate voice only phones, if at all.
These anecdotal reports put some additional color to RIM's most recent financial results, which indicated that the company is increasingly reliant on consumers for growth.
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Atlantic Equities analyst James Cordwell notes that RIM's position in the enterprise market may be more worrisome than falling average selling prices and fickle consumers:
Enterprise net adds remain subdued – cyclical or structural? Overall net adds of 3.8m fell short of our 4.0m estimate, partly due to an ongoing rundown in channel inventory but also because enterprise net adds of ~0.7m remained at the lower level seen in Q1 (vs over 1m average in FY09). Whilst some improvement is to be expected in CY10 as the economy improves, this does raise questions as to the level of further growth available within the enterprise segment.
Goldman Sachs analyst Simona Jankowski also highlights enterprise concerns:
RIM’s enterprise subscriber growth will likely be lower, given the increasingly common use by small-and-medium enterprises of the BIS (i.e. consumer) rather than BES (i.e. enterprise) BlackBerry service, which could suggest we were previously overestimating RIM’s BES growth potential.
It's too early to stick a fork in RIM's enterprise business (the economy could roar back along with enterprise data plans for employees), but there are some serious questions to ponder.
- Are corporations moving to a bring-your-own-smartphone model instead of company-issued phones? Exchange support, the big sell to the enterprise, seems to be available in many phones these days.
- Is there an opening for Google? If the costs are the BlackBerry Enterprise Service prohibitive enough Android could be an option---especially if workers bring their own phones to work.
- Will the iPhone ding RIM where it hurts---the enterprise? In the consumer market it's Apple vs. RIM. But if companies refuse to pay the freight on enterprise data plans it's likely that they will wind up supporting the iPhone in bulk.
Also see: RIM signals price war potential; Fallout could be substantial