What Does ActiveSync Mean to Research In Motion’s Service Revenue?
At CES RIM demonstrated Playbook 2.0 software and revealed that email (even consumer email) will be handled via ActiveSync, which is a Microsoft technology. By adopting ActiveSync to send email to the Playbook (and presumably all upcoming BlackBerry 10 devices), it sounds like the NOC isn’t being used for email transport anymore.
This change is causing some people to wonder if RIM’s service revenue may be at risk. The stock market has long loved the fact that RIM can collect service fees from carriers on a recurring basis. Every BlackBerry subscriber has traditionally generated a few bucks per month of service revenue for RIM. Users don’t pay this to RIM directly. They just pay their bill, and RIM collects the fees from the carriers.
As you may or may not realize, RIM generates over $1 billion in service revenue per quarter, which is about 20% of their +$5 billion in quarterly revenue. It may only be 20% of revenue, but it’s by far the most profitable revenue for RIM since service margins are huge. Hardware margins aren’t so huge. If RIM lost these service revenues, the company would be unprofitable by most analyst estimates.
A big part of the reason that RIM stock is trading at near-record lows is driven by Wall Street’s belief that this service revenue is not sustainable. After all, no other mobile platform has been able to duplicate these service fees, and given the competitive environment it’s fair to ask what value-added extras RIM is bringing to the table. Something’s gotta give, right?
CrackBerry.com‘s feed sponsored by ShopCrackBerry.com. What Does ActiveSync Mean to Research In Motion’s Service Revenue?
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