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Thursday, April 19, 2012

BlackBerry's Bold Move


Reuters news agency this week released an article with the hopelessly biased title, “RIM’s BlackBerry May Have New Hope in One Market.”  Within that article, however, Research in Motion outlines a great new sub-strategy to further increase sales in emerging market countries.

When I was in India just a few years ago, it was impossible not to notice how everyone – no matter how poor - has a mobile phone.

That bicycle-rickshaw driver may live in a hut made of dried cow dung and tin, yet he owns a mobile phone.  The street vendor who sells curried rice for $0.20, then washes the plates in a pothole filled with rainwater and cow piss…she has a mobile phone too.  The young call centre employee, who lives in his parents “condo” (three rooms and almost no furniture), owns both a mobile phone and a laptop: he is middle class.

RIM’s strategy is to capture the lucrative “trade up” market: the billions of people who currently own older mobile phones capable of talk and text but little else.  These people could never realistically afford an iPhone 4S, yet are willing to spend a few months’ salary to get a simple, reliable smartphone like RIM’s new BlackBerry Curve 9220.

The Curve 9220 is a sleeker version of the 8520, with improved Web browsing, Facebook and Twitter apps, FM radio, long battery life, and $48 US worth of free application downloads – including both business applications and games like "Ultimate Cricket." In other words, the features are simple, but are the most important ones for the customer base RIM is trying to capture.  Monthly plan fees start at as little as $5!

The Curve 9220 will sell for about $210 US (without contract), which compares nicely to the older iPhone 3GS which sells for $350 or more and has higher monthly plan fees.

Earlier this year, RIM made a great move by upgrading its Playbook tablet operating system, and slashing prices down to $199 to compare positively to the Kindle Fire.

RIM has been struggling of late, and no one yet knows if these and other strategies will give RIM its profitability back.

I’m not willing to make a huge investment in RIM – but I am willing to throw a few investment dollars their way.  I think RIM has been written off far too easily.


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"Asia is not going to be civilized after the methods of the West.  There is too much Asia and she is too old."

Rudyard Kipling

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Disclosure

Do not buy stocks, or take this or any other financial advice without doing your own analysis; including, but not limited to: reviewing business models, financial statements, management style and philosophy, recent developments, market macroeconomic analysis, and chart analysis. If you do not know how to do these things, you shouldn't be buying stocks in the first place. Seek the advice of professionals, as appropriate.

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