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Table of Contents
1

EXECUTIVE SUMMARY..................................................................................................................................4
1.1

HEADING 2..............................................................................................................................................4
1.1.1

EXTERNAL ANALYSIS.....................................................................................................................................5
2.1

HEADING 2..............................................................................................................................................5
2.1.1

3.1

BUSINESS DEFINITION/MISSION/VISION........................................................................................6

3.2

MANAGEMENT STYLE.........................................................................................................................6

3.3

ORGANIZATION STRUCTURE, CONTROLS AND VALUES............................................................7

3.5

3.3.1

ORGANIZATIONAL STRUCTURE.........................................................................................7

3.3.2

ORGANIZATIONAL CONTROLS...........................................................................................8

3.3.3

ORGANIZATIONAL VALUES.................................................................................................8

STRATEGIC POSITION DEFINITION..................................................................................................9

3.4.1

CORPORATE LEVEL................................................................................................................9

3.4.2

BUSINESS LEVEL..................................................................................................................12

3.4.3

RESOURCES & CAPABILITIES............................................................................................13

FINANCIAL ANALYSIS.......................................................................................................................23
3.5.1

PERFORMANCE AND OPERATING RATIOS.....................................................................23

3.5.2

VALUATION OF RIM.............................................................................................................25

3.5.3

SCENARIO ANALYSES.........................................................................................................26

ANALYSIS OF THE EFFECTIVENESS OF THE STRATEGY.....................................................................28

4.1

HEADING 2............................................................................................................................................28
4.1.1

HEADING 2............................................................................................................................................29
5.1.1

HEADING 3.............................................................................................................................29

CONCLUSIONS................................................................................................................................................30
6.1

HEADING 2............................................................................................................................................30
6.1.1

HEADING 3.............................................................................................................................28

RECOMMENDATIONS...................................................................................................................................29
5.1

HEADING 3...............................................................................................................................5

INTERNAL ANALYSIS......................................................................................................................................6

3.4

HEADING 3...............................................................................................................................4

HEADING 3.............................................................................................................................30

APPENDIX........................................................................................................................................................31
7.1

RIMS ORGANIZATION CHART........................................................................................................31

7.2

STRATEGIC SOURCING FRAMEWORK...........................................................................................32

7.3

BCG MATRIX........................................................................................................................................33

7.4

% SALE OF BUSINESS UNITS FROM 2002 - 2008...........................................................................34

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7.5

RIM BUSINESS VC ANALYSIS...........................................................................................................34

7.6

VRIO ANALYSIS...................................................................................................................................36

7.7

RIMS HISTORICAL FINANCIAL STATEMENT...............................................................................44

ENDNOTES.......................................................................................................................................................47

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1 Executive Summary
1.1

Heading 2

1.1.1 Heading 3

1.1.1.1 Heading 4

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2 External Analysis
2.1

Heading 2

2.1.1 Heading 3

2.1.1.1 Heading 4

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3 Internal Analysis
3.1

Business Definition/Mission/Vision
Research In Motion, Ltd., (RIM), headquartered in Waterloo, Ontario (Canada) is a leading

designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile
communications market. RIM targets both enterprise and consumer market. RIMs product
portfolio includes BlackBerry wireless solution, the RIM Wireless Handheld product line,
software development tools, Radio-modem, and other hardware and software. (RIM Website).
RIM is the number one smartphone vendor in North America. The success of BlackBerry
products and services is driven by passionate employees, outstanding partnerships, distinctive
technological expertise, a commitment to quality and a culture that embraces innovation,
customer service and operational excellence (RIM annual report, 2009). The company strongly
believes in innovation and creative thinking, and recognizes the importance of providing an
environment that inspires people to realize their full potential. 'Always On, Always Connected'
computing and communications solutions is RIM's longstanding vision. (RIM Website)
3.2

Management Style
From Business Weeks interview with RIMs founder Mike Lazaridis, RIMs success forces

are successful R&D culture and a decade of sustainable innovation. Mr. Lazarids said in the
interview, If you build the right culture and invest in the right facilities and you encourage and
motivate and inspire both young and seasoned people and put them all in the right environment
then it really performs for you. It's what I call sustainable innovation.1
Newly hired employees attend weekly vision meetings; the company also has brainstorming
leadership committees on everything from technology to research and development,
manufacturing to the user interface of the product. The committee opens to all employees as long
as they have the capability.
The whole company uses the product! So they actually test new ideas within the company.
This is a clever way to make RIM very competitive. Because of the way the devices are built
they can update the software and test a new feature right away, the test within the whole
company becomes very efficient. As Canada's largest employer of cooperative education
students, RIM has a wide cross-section of people, from the very young to the very experienced,

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who are testing these ideas. Decisions get made very quickly in the company and they get made
in very collaborative ways, and they get made with accurate information.
3.3

Organization Structure, Controls and Values

3.3.1 Organizational Structure

Appendix 7.1 is a high level overview of Research in Motions organization structure. Mr.
Jim Balsillie and Mr. Mike Lazaridis share the CEO responsibilities.
Mr. Balsillie is a chartered accountant and an MBA from Harvard University. Prior joining
RIM, Mr Basillie held several corporate executive positions (sales, finance, and business
development) in North America. Mr. Jim Balsillie has been Chairman and co-CEO at Research
In Motion since 1992. Mr. Basillie is responsible for driving RIMs corporate strategy, business
development, marketing, sales, and finance. Mr. Basillie has been instrumental in leading and
transforming RIM into an international technology provider.
Mr. Mike Lazaridis found Research In Motion while he was a student at University of
Waterloo. Mr. Lazaridis is known in the global wireless community as a visionary, innovator, and
engineer of extraordinary talent. As President and Co-CEO, he is responsible for product
strategy, research and development, product development, and manufacturing. Mr. Lazaridis has
led RIM earn numerous prestigious product and technology awards, which have increased the
companys recognition by the international wireless community.
RIMs corporate structure allows RIM to focus equally on product development and global
market development. We believe this unique corporate structure has played a major role in RIMs
success.
RIM has offices in North Americas, Europe and Asia Pacific. RIM has over 12,000
employees around the world, with over 5,000 employees engaged in R&D, which includes
advanced research, product development, standards and licensing.
The companys two major business units are Enterprise business unit and Blackberry
Wireless Solutions business unit. Enterprise BU creates software ranging from the BlackBerry
Enterprise Server to the applications, operating systems and radio firmware on BlackBerry
Smartphones. Blackberry Wireless Solution BU focuses on the development, execution and
support BlackBerry wireless solution. The BlackBerry wireless solution is comprised of

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BlackBerry smartphones, software and services. RIMs primary revenue stream is generated by
the BlackBerry wireless solution.
3.3.2 Organizational Controls
RIM welcomes and encourages innovation and creative thinking in the company. RIM
recognizes the importance of providing an environment that inspires people to realize their full
potential. Working in RIM can be inspiring, challenging and deeply rewarding. The incentive
program is available to all permanent employees and is based on parameters relating to
performance, which includes innovation and creativity brought forth. RIM provides FREE
BlackBerry device to all employees while they are employed with the company. (RIM Website)
RIM heavily relies on its intellectual property, the company records all employee actions in
the interest of maintaining control over intellectual property2. All employees are aware of this
control and understand that their information is transparent and in visibility, if they want to make
private conversations, they will bring in personal devices.
Special cautions are for pre-release beta devices, since employees test and use pre-release
beta devices, the company asks employees to keep the devices out of sight when they go off
campus to avoid people taking photos of the new technology. If the device is lost, the company
will wipe off the device immediately. RIMs employees are very cooperative and understand
their obligations as beta tester.
To support corporate governess, RIMs Code of Ethics sets forth specific policies to guide
Board of directors, officers, and employee in the performance of their duties. The company
maintains a culture of ethical standards and commitment to compliance, and provides a work
environment that encourages employees to raise compliance concerns to the attention of
management, address them promptly.
3.3.3 Organizational Values
At Research in Motion, the main cultural values are seriousness, technical competence, and
intensity.3 Other corporate cultures are young, fast-paced development environment, casual,
informal. The values support the kind of commitment and technical innovation that have allowed
RIM to revolutionize e-mail communications. To support this kind of culture, the company is
situated across Davis Computer Research Centre at the University of Waterloo, one of the most

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respected computer-science schools in North America4. With a continual flow of interns and new
employees from the university, the company constantly refreshes its social network with
knowledgeable and energetic people. The companys name derives from Mr. Mike Lazaridiss
belief that research and engineering excellence would drive the company's growth, and Motion.
(Rapid Motion)
RIM provides an environment that support healthy lifestyle through Healthy@RIM program.
RIM has been named as Canadas most Admired Corporate Culture in 20065. From RIMs
website, Our people work hard, inspire each other and celebrate success. We meet the
challenges of a competitive, evolving marketplace by remaining true to the values that underline
our corporate culture. If you have a passion for excellence, a drive to achieve, and the desire to
work with others who share it, you belong at RIM.

3.4

Strategic Position Definition

3.4.1 Corporate Level

Business Portfolio
According to RIMs Form 10K, the companys primary revenue stream is generated by
BlackBerry wireless solution, which includes sales of BlackBerry smartphones, software and
service. See Figure 3.1.

13%

2%

3%
Smartphones
Service
Software
Other
82%

Figure 3.1 RIMs Business Portfolio in fiscal 2009

Source: RIM Annual Report (2009)

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RIM generates smartphone revenues primarily from device sales to carriers. In fiscal 2009,
smartphone sales represented 82.1% of total company revenues. BlackBerry smartphones are
available from hundreds of carries and indirect channels, through a range of distribution partners
and operated in a variety of carrier network types. RIM has traditionally been focusing toward
the enterprise market. More recently the company has introduced consumer oriented
smartphones and it has made significant inroads into the consumer market, and RIM is
positioning itself to take a larger share of the consumer market. In fiscal 2009, RIM launched
global BlackBerry brand campaign, and BlackBerry ranked at number 51 on the Millward Brown
Top 100 Most Powerful Brands list.(RIM Annual Report, 2009). RIM introduced three new
platforms in fiscal 2009, the Bold (3GQWERTY), the Storm (3G touch screen), and the Pearl
Flip. The Bold is targeting enterprise customers and the high end of the consumer market, the
Storm will attract both enterprise and consumer markets and the Pearl Flip will be largely sold to
the consumer market. The Curve (introduced in fiscal 2008) which has seen strong adoption in
the enterprise market, also widely penetrated into the consumer market as its price declines. RIM
has launched As of FQ309, 55% of RIMs customer base was enterprise and the remainder
consumer6.
BlackBerry service is provided through a combination of RIMs NOC (Network Operating
Center) and the wireless networks of RIMs carrier partners. Unlike other handset vendors, RIM
operates its own network operations center, or NOC, which allows it to collect a monthly fee
averaging ~$5-6 per subscriber7. In fiscal 2009, RIMs BlackBerry subscriber account base is
approximately 25 million; the company generates service revenues by charging a monthly
infrastructure access fee to a carrier or reseller, the carrier bills the end customer. The service
revenue accounts for 12.7% of the total company revenue in fiscal 2009.
RIMs software business accounted for 2.3% of revenues in fiscal 2009. BlackBerry wireless
solution comes with software that can be installed at the corporate server level and on personal
computers. The company charge software license fee and upgrade fees from enterprise software.
Consumer software is included in hardware purchase, or at purchase from a carrier or RIM
website. Software business also includes BlackBerry technical support and software maintenance
program.

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Other business includes accessories, non-warranty repairs, non-recurring engineering

development contracts, and BlackBerry licensing program.
Partnerships and Acquisition
RIMs strategy has been to include its handsets in the portfolio of as many mobile operators
as possible. In fiscal 2009, RIM added over 125 new carrier and distribution channel
relationships for a total of over 475 carriers and distribution channels in over 160 countries. RIM
is able to make substantial savings on marketing and promotion cost since the handsets are
promoted to the market through operators. According to ZDNET, RIM is the most profitable
device for carries because it eats up less bandwidth. 8 RIM has a shadow telecom network which
pushes, compresses data, so carrier do not have to carry the entire load which will yield more
profits to carriers. So we believe RIMs partnership with carriers is a win-win strategy for both,
and is a great asset for RIM.
RIM also looks for partnership, collaboration opportunity to add value to its technology,
products and services. The company tied up with AOL, MySpace, and Facebook, to enhance the
BlackBerry smartphone user experience through partners compelling mobile applications. Such
strategic alliances and sustained relationships with these companies could provide an opportunity
to enter new markets and gain better market share and thereby enhance its business.
RIM expands the functionality of its services with acquisitions. It bought voice mail and
mobile telephony software maker Ascendent Systems in 2006, and data compression company
SlipStream Data in 2007. The company purchased wireless security software maker Certicom for
in 2008. Early in 2009 RIM acquired, Chalk Media, a content distribution system developer for
BlackBerry devices.
RIMs strategic sourcing frame work is in Appendix 7.2, partnership with network carrier and
third party application provider provides high strategic value to RIM, while RIM has low
competence than the suppliers.
BCG Matrix
In fiscal 2009, RIM is the number two smartphone vendor in the world, it has 16% market
share in the worldwide smartphones market. The smartphone industry is project to grow at about
30% worldwide. With the increased smartphone adoption in the world, RIM is introducing more

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smartphone devices with advanced features to appeal broader consumer base in the world. Thus
RIMs BlackBerry wireless solution business is a Star. (Appendix 7.3)

3.4.2 Business Level

RIM is focused on its core product, mobile handset devices for its market growth and
revenue. Total revenue from Mobile handset is growing since 2002 while other business sectors
are decreasing and became complements for the handset devices. (Refer to Exhibit x). In
addition, RIM currently received $5-6 monthly service fee from its current subscriber is expected
to grow to 44% of total company gross profit in 2012 because of the expanded customer base.
Therefore, the business strategy to grow its revenue is focused on positioning its handset devices
to targets at different segments customer where the Smartphone is entering the mature product
stage with strong potential growth.
RIMs business level strategy focused on different handset devices targeted at different
customer segments, Enterprise, Prosumer, and consumers to meet corporate strategy to enter the
consumer market. RIMs handset sales also brings in revenue for other business units such as
service and software. Therefore, the business strategy is focused on selling the devices itself. The
handset devices can divide into three types based on their position, features, and targeted
customers. The following were selected to representative the three major types: (Exhibit x)
-Pearl Flip (Prosumer)
First clamshell blackberry phone aimed at prosumer who is looking for their first smartphone. It
is also the most consumer-oriented phone RIM has introduced to the market. Unlike previous
BlackBerry devices, the Pearl includes a music player, camera, as well as other multimedia
functions. It aims at the younger generation and people who just switch to smartphone.
-BlackBerry Storm (Consumer)
It is RIM's first touchscreen device and the first device without a physical keyboard. It is
intended to be a direct competitor to Apple iPhone 3G, the T-Mobile G1 by HTC and the HTC
Touch family.

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-BlackBerry Bold (Enterprise)

All the familiar BlackBerry applications

are available on the Bold:

WordToGo,

PowerPointToGo, BrickBreaker and WordMole. The Bold also offers new or updated
applications for BlackBerry Messenger, WHERE GPS, and Mobi4Biz.
To be competitive in the mobile phone market, RIM is using its value drivers with its resources
and capabilities to modify its business strategy to meet the goal of its corporate strategy in
following areas:
-Expand product portfolio with new smartphones models and include support for emerging
network technologies
-Develop further enhancements to our software and services platform to grow our customer base
in existing and new markets
-Grow and strengthen relationships with our carrier and distribution partner across the globe
-Enhance the BlackBerry user experience further by working closely with our partner to develop
compelling mobile applications
-Leverage and expand outsourcing partnerships and increase outsourcing volumes for
manufacturing
-Attract, hire and retain the best available talent to maintain RIMs market leading position

3.4.3 Resources & Capabilities

Value Drivers
- Innovative Products
Theres an increasing trend in prosumers segment business users buying through consumer
channel not only for business needs but also for personal needs. Smartphone users are
demanding more versatile features that encompass both technological and entertainment aspects
such as internet browsing, mobile blogging, social networks, audio and video player, Wi-Fi and
GPS. In FY 2009, RIM launched a number of new devices, Blackberry Storm, Blackberry Pearl
Flip and Blackberry Curve that incorporate all these features and also announced Blackberry App
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World to increase its value proposition among smartphone users. Blackberry Storm is RIMs first
product with touch screen feature.

- Usability, Manageability and Security

RIMs unique feature that makes it so desirable among enterprise users and prosumers is push
email functionality, which allows users to automatically see new emails on their device. Also,
RIMs proprietary OS and secure enterprise server enable end to end platform design that
provides enterprise users with comprehensive security. The unique end-to-end design allow users
to converge and connect to Microsoft Outlook, IBM Lotus Notes, Novell GroupWise
and many ISP email services securely lead RIM to be a leading choice of both IT departments
and individual users. Furthermore, RIM through partnership with ISVs (Independent Software
Vendors) develops applications that can be used with its OS and makes a number of key APIs
(Application Programming Interface).
- Brand Equity
BlackBerry brand is listed at number 51 on the Millward Brown Top 100 Most Powerful Brands
in the world, and rated as the fastest growing brand on the list with a 390% increase in brand
value. It is also the number 1 selling smartphone in North America.
Cost Drivers
- Sales, Marketing and Distribution
By fostering strategic partnership with over 475 network carriers and distributors worldwide,
RIM is able to save on marketing on promotion costs, and avoiding direct sales. This strategy
also allows RIM to focus most of its time and resources towards R&D and services to ensure that
it continues to come up with attractive devices and solutions for its customers. RIM has
approximately 1,600 personnel or 12.5% of the workforce in sales, marketing and business
development. In fiscal 2009, RIMs spending in sales, marketing and administration was about
$1.5 Billion or 13.5% of revenue.
- R&D

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With 5,100 people or 40% of total workforce in R&D, RIM has a ver y high ratio of employees
dedicated in advance research and product development areas. RIMs spending in R&D in fiscal 2009

was $684.7 Million, 90% increased from fiscal 2008.

- Manufacturing
RIM has a total of 242,000 sqft of manufacturing facilit y in Waterloo, Ontario with
approximately 1,900 personnel or 16% of the workforce involved in manufacturing and production. To
support increasing demands, RIM continues to scale its manufacturing capacity by expanding its own
manufacturing facility, upgrading production and test equipment, as well as adding new sourcing partners
globally.

- Customer Service
RIM has approximately 1,500 dedicated technical and support staff at five customer support
facilities around the world, providing 24-hours, 7-days a week per week. As part of the effort to
improve customer service and meet the needs of increasing customer base, RIM opened the fifth
customer care facility in Irving, Texas. RIM also continued to grow other customer care centers
to include multilingual training programs such as, French, Italian, German, Spanish, Simplified
Chinese, Japanese and Brazilian Portuguese.
Resources and Capabilities
- Top Management Team
RIM believes key factors that contribute to its success are the strong quality and skills of the senior
management team and other personnel. By bringing together highly qualified management team with
extensive experience that encompass both management and engineering skills, RIM is able to meet
challenges and excel in highly competitive smartphone industry. compe Four out of six top management
personnel has Master Degree in Business Administration with operation or engineering background.

- R&D
RIM has strong R&D team with expertise in RF Engineering, Analog RF, Digital ASIC,
Audio, Display, Intelligent Antennas, Power Management, Firmware, Software Tools, Testing
Software and Product Design. With such strong talents in R&D team, RIM is able to integrate all
the complex components into an efficient board layout design and customize its core proprietary
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hardware designs to address new applications, network protocol and transmission frequencies to
support multi wireless protocols.

- Network Effect
Blackberry is recognized as one of the premier smartphone brands. Historically RIM has strong
presence in North America and Europe, and continues to broaden strategic alliances with
enterprise, SW application companies, telecommunication carriers and distributors to expand
globally, particularly in Latin America and Asia. Up to day, RIM has partnership with 475
carriers and distribution channels in over 160 countries and deployed over 150,000 Blackberry
Enterprise Servers.

- Supply Chain Management

RIM continues to improve its manufacturing practice, particularly for new product introduction, by
integrating supply chain activities with its internal R&D activities. RIM also incorporated flexible
production capacity into its own manufacturing practice and through partnership with EMS with allows
RIM to quickly adjust inventory level in response to demands. RIMs procurement team is responsible for
negotiating pricing directly with component suppliers, and controlling all sourcing decisions, and
whenever possible source components from at least two suppliers to avoid supply disruption, which is
critical to ensure only quality components are used to reduce waste and field failures.

- Customer Service
RIMs organizational practice is dedicated to product innovation, operation excellence and
customer satisfaction. In fiscal 2009, RIM launched four new initiatives including the
BlackBerry Certification Program for its partners to enhance their knowledge of BlackBerry
hardware and software; BlackBerry Support Community Forums, a self-service discussion
forum to bring together device users and IT administrators; BlackBerry Expert Support Center
(BESC) to provide on-line technical support for accounts that have technical support contracts
with RIM; and BlackBerry Answers which acts as both a mobile and desktop self-serve Q&A
center. RIM has five customer service centers worldwide with multilingual support.

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Value Chain

VRIO Analysis
RIM has a number of resources it can exploit, to gain a competitive advantage. These
resources are described and analyzed in Exhibit xx. Basically, RIMs resources in this VRIO
analysis can be classified into busines, marketing, operational and technical resources.
Some of the resources stem from the fact that RIM was the first mover in the smartphone
market, and therefore has significant resources and capabilities due to its experience in this field,
its established relationships with carriers and distributers, and corporate customers, as well as its
large customer base. RIMs brand is also a valuable and leveragable resource which helps RIM
sell to both business and prosumer users. RIMs Blackberry system is recognized as one of the
most secure smartphone systems in the industry. RIMs The Blackberry Enterprise Server
software which RIM developed not only provides RIM with a competitive advantage because it
is tailored specifically for Blackberries, but is a source of revenue for RIM too, with the persubscriber licensing fees RIM charges to corporate customers.
Finally, other resources that RIM has include proximity of its headquarters to the Davis
Computer Research Center, providing RIM with a steady stream of interns as well as access to
renowned academic faculty and research, and RIMs company culture which encourages hard
work, innovation and creativeness.
An analysis of RIMs 4Ps: Product, Pricing, Placement and Promotion
This section analyzes the 4Ps of RIM: Product, Pricing, Placement and Promotion
Product
As the original Smartphone manufacturer, RIMs Blackberry products have a long history.
The Blackberry has evolved from being a simple, monochrome push e-mail

client,

to a

sophisticated device with touchscreen and Wi-Fi (please refer exhibit xx). Among the major
product improvements at each major model release are:
Model
5000/6000 series
7000 series

Major hardware technology improvements

Basic e-mail and phone integrated into one single device.
Monochrome screen.
Color screen, Bluetooth support

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Full semi keyboard instead of QWERTY keyboard. Allowed for

7000 series with semi-full smaller form factor. Disadvantage of not having a full keyboard
keyboard
partially mitigated by using predictive wording technology
Predictive wording technology, Wi-Fi, built-in camera, MP3
Pearl series
playing capability, support for external SDRAM card
3.2MP Camera with flash and autofocus, Trackball interface,
Curve Series and Bold
GPS
Storm
full-size screen touchscreen
As shown from the table, RIMs product portfolio has mainly targeted two markets: The
business user market (7000 series as well as Curve and Bold), as well as the mainstream
consumer market (Pearl series and Storm).

Products for the business user focused on

effectiveness of major business functions such as e-mail (by using a full QWERTY keyboard),
while products for the mainstream user focused on more personal applications such as having a
full touchscreen, and having a better camera and MP3 playback capabilities. From a competitive
timeline perspective, the Blackberry series major technological advancements shown in the table
above, have generally been in-line with competitive smartphones.
On the software aspect, all Blackberry smartphones operate using the Blackberry
operating system. This is a double-edged sword: on one hand, developing their own operating
system allowed RIM to customize it only for the Blackberry, increasing the efficiency in terms of
operating system and hardware interfacing. On the downside, it also caused Blackberry to lag
behind others in terms of 3rd-party applications, since Microsoft Windows Mobile and Symbian
were more popular with 3rd party developers.
Another important aspect of RIMs products is the Blackberry Enterprise Server software.
This is the server-side software that enabled Blackberrys push email technology by pushing email to Blackberry smartphones. The customers for this server software are mainly corporate
entities. RIM charges customers for the software and it is part of RIMs methods of revenue
generation.
Pricing
Blackberrys pricing strategy generally reflects a company that knows it can charge a
little more for its products because of its brand name, yet not too much more, since Smartphone
customers have almost no loyalty to brands.

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The following table shows Blackberrys undiscounted retail price, as well as discounted
prices provided by wireless service providers, which locks the purchaser into a 2-year service
contract with the wireless service providers. In the United States, the a big portion of cellphones
are bought through wireless service providers, and even if they are bought at retail stores, a
wireless service provider is usually involved this will be explained more in the placement
section.
Blackberry Model

Bold

Storm

Curve

Undiscounted retail price

$499

$499

$499

$199
Not
available
Not
available

$169

$119

$249

$149

$249

$179

Service Provider
Price with 2-year
contract

Verizon
AT&T
T-Mobile

Not
available
$399
Not
available

Pearl
Price not
available

The table shows that undiscounted price of a Blackberry is around $500. Wireless service
providers offer the phone at a much lower price, with a service contract. As shown in the external
analysis section, this price is many of the other smartphones available, such as the iPhone and
Motorola. It is, however, more expensive than the smartphones offered by Nokia who specializes
in price leadership.
Like the other players in the Smartphone industry, RIMs pricing strategy reflects a
waterfall strategy, where a certain product becomes cheaper over time, whereas newer products
fill the position of the high-priced product. For example, the 7000 series model Blackberry was
sold around $500 (undiscounted) when it first came out, but over the years the price has dropped
significantly. Now, it sells for a very cheap price, while the newer Bold and Storm models have
taken flagship status and the $500 price tag. This means that RIM, just like other smartphone
manufacturers, have to constantly update their product portfolio with newer breakthrough
products, in order to give customers a reason to pay the top price of around $500 for a
smartphone, since customers expect the price for any one smartphon to drop over time.
Placement (Channel)

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The Blackberry is currently not sold directly by RIM. In other words, RIMs corporate
website does not allow customers to purchase directly from RIM. In addition, RIM generally
does not have brick-and-mortar shops that sell their Blackberry smartphones. Instead, RIM sells
Blackberries through online and traditional retailers, as well as wireless service providers.
In some cases, online and traditional retailers, such as Amazon.com or Best Buys, will
partner with wireless service providers, to sell Blackberry smartphones. For example, when a
user shops for a BlackBerry Bold on Amazon.com, the user is given the choice to buy it at a
discounted price of $149, with a 2-year service contract provided by AT&T wireless (see exhibit
xx). Wireless service providers also sell Blackberry smartphones, so at first glance this looks like
a case of channel conflict.
However, if we analyze deeper, we find that channel conflict is minimized, because:: The
retailers goal is to sell Blackberry Smartphones, since that is how the retailers get their revenue.
The wireless service providers goal is mainly to sell their services, and they are able to do so
because they partner with the retailers to provide wireless service to the customers who bought
the blackberry smartphone. Wireless service providers get much more revenue per customer,
from service fees, rather than the Blackberry smartphone hardware itself. In fact, many times,
wireless service providers will subsidize the customer on the smartphone, in order to get their
business as a service customer. This is evident by the many smartphones that are offered free by
wireless service providers.
Promotion
The majority of the Blackberrys promotion actually comes from not from RIM itself, but
also from its service provider partners and fans, who had spread the word on upcoming and
current Blackberry products virally. In fact it was noted by a 3 rd party (rimarkable.com) blog that
it was difficult to obtain the contact information for RIMs own advertising department for
Blackberry.
First, lets discuss Blackberrys promotions coming from RIM itself. There is not much
public advertising directly from RIM. On the Blackberry.com website, as of May 2009, the two
main Blackberry smartphones shown prominently are the Blackberry Bold and Blackberry
Storm. These two are RIMs flagship products today and are being heavily promoted by RIM.
(see exhibit xx)

Page 20 of 50

Going on to Blackberry promotions by its wireless service provider partners: these

promotions happen more frequently and visibly. For example, before the Blackberry storm was
launched, Verizon Wireless did a promotion campaign for the Blackberry Storm, saying it was
the First Touchscreen Blackberry. This message was featured prominently in billboards and
television and online advertisements. In addition to that, Verizon wireless is also currently
offering a buy one Blackberry, get one free promotion (see exhibit xx). Both Verizon Wireless
and AT&T Wireless launched Blackberry Storm and Bold promotional campaigns respectively,
during the launch of the product.
In addition to promotional campaigns by RIMs channel partners, another significant
portion of Blackberrys promotion comes from word-of-mouth or viral marketing. The vast
majority of Blackberry commercials are available on YouTube, posted by fans of the Blackberry
phone. In addition, there are also many blogs about the Blackberry, for example at
Crackberry.com and Rimarkable.com. These websites provide a communal bond for
Blackberry users to spread the word about upcoming products and current promotions to other
Blackberry users and non-users.
In addition to that, the Blackberry Brand provides a significant source of self promotion
too. RIM has built up Blackberrys brand to a point that it is self-promoting. Due to Blackberrys
brand, there is significant pull from the masses to obtain new information about Blackberry,
rather than Blackberry having to push information to the public.
Product Life Cycle
As of 2008, the year-to-year annual revenue growth for the smartphone market was still
in the high teens, indicating that the smartphone as a product is still in the late growth stage of
the product life cycle, nearing the maturity phase (see exhibit xx and exhibit xx). However,
further enhancements to smartphone technology might still extend the growth phase of the
smartphones product life cycle. During this stage, revenues increase dramatically but
competition also becomes tougher as more players get into the market and improvements happen
on the product. Blackberry is currently facing such newer competition from the Apple iPhone
and HTCs phones.
Building and selling the Blackberry Bold and Storm represents a move by RIM to expand its
distribution and compete more effectively with its old and new competitors.

Page 21 of 50

References:
http://en.wikipedia.org/wiki/List_of_BlackBerry_Models#Monochrome_Javabased_models_.285000_and_6000_series.29
http://crackberry.com/verizon-taking-blackberry-storm-advertising-seriously
http://crackberry.com/verizon-buy-one-get-one-starts-tomorrow
http://www.rimarkable.com/rim-is-advertising-the-blackberry-everywhere

Page 22 of 50

3.5

Financial Analysis

3.5.1 Performance and Operating Ratios

RIMs operating ratios have been discussed in section 2.5.6. Here, we examined RIMs
fundamental financial performance based on past five year financials data. RIMs historical
income statement, balance sheet and cash flow statement are listed in Appendix 7.4.
Income Statement Trend

Figure 3.2 RIM Income Statement Trends

Figure 3.2 shows the incomes statement trends. RIM has achieved exceptional growth in
revenue from last five years, with five year average of 81%. Despite the highly competitive
smartphone market and the global economic recession, RIM still continues the robust sales
performance in fiscal 2009, with revenue up 84% year-over-year. Benefit from the industry shift
to smartphone, RIMs sales momentum mainly attributed to the increased number BlackBerry
smartphone sold, the BlackBerry subscriber base increased to 26 million users in fiscal 2009, up
from 14 million from previous year, which is driven by strong demand from new customers and
upgrades from loyal customer base. RIM occupies 50% of the enterprise smartphone market in
the world and held 50% smartphone market in North America. RIM has grabbed significant
share from the consumer market after the company released Perl, Bold, and Storm in 2008. The
strong revenue growth of the company coupled with improving operational and net profit will
support its growth and expansion.

Page 23 of 50

The company is able to maintain very healthy GAAP gross profit margin at average of 52%,
this is because lower commodity and components cost and the company is able to maintain the
relatively low cost. But, gross margin dropped to 46% in fiscal 2009. This is because the higher
cost associated with the newly introduced feature-rich smartphones.
Net SG&A is growing because of RIMs increased sales and marketing efforts in the
consumer segment. SG&A as a percent of sales has a downward trend, it is primarily because
RIM sells smartphones through network operators instead of direct sales, and this strategy drives
down the relative SG&A costs. R&D expenses have maintained a steady percentage of sales,
since the company believes in innovation and continually invest in R&D.
Balance Sheet Trend

Figure 3.3 RIM Balance Sheet Trend

Figure 3.3 shows the balance sheet trend. RIM maintains strong balance sheet with $2
billion in cash and no debt at the end of fiscal 2009. Receivables are increasing steadily in fiscal
2008 and 2009, this is because RIM let network operators to stock the devices without paying
upfront fees. RIM heavily depends on a number of major operators and channel to distribute
BlackBerry products (RIM annual report, fiscal 2009). Inventory level has been kept at pretty
low level; this is because the high demand for smartphone from carriers, and the carrier are
carrying the inventories. RIM has very low level of long time debt in the past five years, this is
because the company has generated enough operating cashes, so its capital structure is less
leveraged, this also indicates the company is financially conservative.

Page 24 of 50

Cash Flow Statement Trend

Figure 3.4 is RIMs cash flow trend. RIM continues to generate operating cashing flow in an
upper trend and maintains strong free cash flow. The majority of the capital expenditure is to
invest in new facilities, computers and equipment to support RIMs growing employee base and
the expansion and enhancement of the BlackBerry Infrastructure. In fiscal 2009, RIM also
acquired Chalk Media to enhance RIMs business.

Figure 3.4 RIM Cash Flow Trend

3.5.2 Valuation of RIM

Discounted Cash Flow (DCF) is used in RIMs current valuation. Appendix 7.x is the
assumptions used in our DCF valuation. The forecast horizon is five years, with terminal growth
rate of 5%; cost of equity is at 14.1%. We assume the company will have no long term debt
based on its historical trend. The DCF result is that RIM is valued at $40 billion (U.S), with
forecasted price/share at $71.15. The forecasting growth rate is based managements
expectations, and analysts forecasts. In 2009, smartphone market growth will be lower (14% vs.
45% in 2008) due to the economic slowdown as consumers and enterprise defer spending and
delay device upgrades, this will also impact RIMs growth in 2009, which is forecasted as 30%
vs. 84% in 2008. Long term trends for smartphones remain very exciting and once the economy
gets back, it is expected the growth to return to 30% and plus, based on RIM historical sales
performance and its broader range of products, we expect RIM should get its fair market share in
the long run and out grow the industry average, so we forecast the growth rate is 40% in 2011,

Page 25 of 50

but the growth will gradually decline as the increasing competition in smartphone market and
the trend of smartphone is becoming commodity.
3.5.3 Scenario Analyses
We conduct following four scenario analysis to estimate the impact of different strategic
decisions and economic conditions impact on RIMs financial positions.
Scenario 1- Without strategic move
iPhone is the pioneer in introducing touch screen phone and launching application stores to
enhance user experience, and the impact is tangible with iPhones sales growth of 104% year
over year. RIM released its first touch phone, Storm, in 2008 to directly compete with iPhone.
But, without opening application store and services, RIM will definitely fail to market Storm to
the high end smartphone market, which will result in lower ASP prices and much slower growth
in the consumer base. But, we think the growth rate in 2009 will be slightly higher than industry
average, due to RIMs stronger position in enterprise market, and the large subscriber bases
introduced in 2008. So we estimated the growth rate is 20% in 2009, with estimated price/share
of $48 and valuation of $27 billion. The SG&A will slightly decline because of the less
marketing and administration efforts in the consumer segment. The valuation detail is listed in
Appendix 7.x.

Scenario 2 Best case with strategic move

RIM is a new player in smartphone consumer segment, but the company has demonstrated
incredible sales momentum after releasing several high-end consumer devices. The companys
Life in Blackberry campaign has successfully helped Blackberry become the number 51 brand
in the world ( RIMs annual report, 2009), which greatly enhanced Blackberrys brand equity in
consumer segment. We believe RIM will continue defend is enterprise dominant market position
because of RIMs its proprietary technology and high switching cost. BlackBerry application
storefront and BlackBerry application centers will support the growing BlackBerry ecosystem,
help bridge end users with developers and carriers, and continue increase the customer base with
higher average ASP. So under this scenario we forecast the growth rate is 62% with price/share
of $109, and valuation of $62 billion. But with the continuing effort to market Blackberry in
consumer sector, expand the market in the global, and the focus of high end device

Page 26 of 50

manufacturing, we estimate SG&A and COGS will go up. The detail of the valuation is listed in
Appendix 7.x

Scenario 3 Average case with strategic move

Threatened by iPhone and newly introduced Googles G-Phone, Blackberry Storm can only
command a small portion of the high-end smartphone market, but its mid-tier and low-end phone
become popular, this will result in lower ASP prices, and eventually drive down the revenue
growth rate to be 25%, with slightly higher SG&A costs, and valuation of $33 billion. Valuation
details are listed in Appendix 7.x

Scenario 4 Worst case with strategic move

Smartphone industrys high end device providers are following the iPhone trend, by
integrating touch devices with applications and services around music, mobile e-mail. Google,
Nokia and Microsoft already opened their own application stores to attract high end consumers.
RIMs application store can only play a catch up role. With the continue impact of declining
economy, consumer replacement cycle are lengthening across the entire handset market, and
increased competition in smartphone market will drive down the ASP prices, while SG&A will
continue climb up. In such scenario, we estimated that RIMs sales growth rate barely match the
industry growth rate of 15%, with price/share of $40 and valuation of $22 billion. Valuation
details are listed in Appendix 7.x.

Page 27 of 50

4 Analysis of the Effectiveness of the Strategy

4.1

Heading 2

4.1.1 Heading 3

4.1.1.1 Heading 4

Page 28 of 50

5 Recommendations
5.1

Heading 2

5.1.1 Heading 3

5.1.1.1 Heading 4

Page 29 of 50

6 Conclusions
6.1

Heading 2

6.1.1 Heading 3

6.1.1.1 Heading 4

Page 30 of 50

7 Appendix
7.1

RIMs Organization Chart

Board of
Directors

Jim Balsillie

Mike Lazaridis

Chairman and
Co-CEO

President and
Co-CEO

David Werezak

VP
Enterprise
Business Unit

Mark Guibert

Don Morrison

VP

COO

Corporate
Marketing,
Sales, Finance

Blackberry
Wireless
Solutions

Larry Conlee
COO
Engineering and
Manufacturing

Robin Bienfait
CIO
Blackberry
Operations and
Corporate IT

Brian Bidulka
Chief
Accounting
Officer and
Corp
Controller

Source: RIM website http://www.rim.com and Cogmap at http://www.cogmap.com/chart/research-inmotion,-ltd-rim?coglink=7915

Page 31 of 50

7.2

Strategic Sourcing Framework

Page 32 of 50

7.3

BCG Matrix

Page 33 of 50

7.4

% Sale of Business Units from 2002 - 2008

7.5

RIM Business VC Analysis

Page 34 of 50

RIM Blackberry
Phone

80

Weighted score

Score (1-10)

10

Feature Specs

480

80

Bold
Weighted score

10 3.25 in

Score (1-10)

10

Feature Specs

Screen Size

Weighted score

BlackBerry

Pearl Flip

Score (0-10)

weighting

Brand

Feature Specs

Feature

(1-10)

BlackBerry

Storm

10

80

70 2.4 in

50 3.5 in

90

Screen resolution

9 360

81 240 x 320

54 480 x 320

72

Battery Life - in use

9 6 hours

81 4 hours

45 4.5 hours

54

Battery Life - standby

8 15 days

72 14 days

64 13.5 dasy

48

Internal memory

7 1 GB

63 128 MB

7 1 GB

63

3G

6 Yes

54 N/A

0 Yes

54

Bluetooth

4 Yes

36 Yes

36 Yes

36

Internet Browser

4 Yes

36 Yes

36 Yes

36

E-mail

4 Yes

36 Yes

36 Yes

36

Wi-Fi

4 No

0 Yes

36 Yes

36

GPS

3 Yes

27 Maps

21 Yes

27

Touchscreen

9 Yes

81 N/A

0 N/A

Digital Camera Resolution

7 3.2 MP

63 2.0 MP

49 2.0 MP

49

Weight

8 5.5 oz

40 3.6 oz

72 4.8 oz

56

820

586

Normalized score

737
0.899

100

0.715

Total

Page 35 of 50

7.6

VRIO Analysis

Page 36 of 50

Table 1: Blackbery 5000 & 6000 Monochrome series

Family

Model

Specialty
Early Java-based

"Quark"

65XX

67XX

Screen

Network

Notes

5790

large 160x160 pixel monochrome

900 MHz Mobitex

e-mail services only

5810

large monochrome screen

1900 MHz GSM/GPRS

phone but headset required

900/1800 MHz GSM/GPRS

phone but headset required

5820

large monochrome screen

6210

medium 160x100 pixel monochrome 900/1900 MHz GSM/GPRS

integrated phone

6220

medium 160x100 pixel monochrome 900/1800 MHz GSM/GPRS

integrated phone

6230

medium 160x100 pixel monochrome 900/1800/1900 MHz GSM/GPRS

integrated phone (blue case)

6280

medium 160x100 pixel monochrome 850/1800/1900 MHz GSM/GPRS

integrated phone

6510

medium monochrome

iDEN

integrated phone, integrated two-way radio

6710

large monochrome

900/1900 MHz GSM/GPRS

integrated phone

6720

large monochrome

900/1800 MHz GSM/GPRS

integrated phone

6750

large monochrome

800/1900 MHz CDMA2000 1xRTT integrated phone

Table 2: Blackberry 7000 color screen series

Family

Model

Screen

Network

Notes

7210

900/1900 MHz GSM/GPRS

integrated phone

7220

900/1800 MHz GSM/GPRS

integrated phone

900/1800/1900 MHz GSM/GPRS

integrated phone

7230
medium 240x160
pixel colour

72XX

800/1900 MHz CDMA2000 1x (EVDOintegrated phone, Bluetooth

capable w/firmware update)

7250
7270

corporate WLAN 802.11b networks for

data and VOIP

7280

850/1800/1900 MHz GSM/GPRS

integrated phone

7290

850/900/1800/1900 MHz GSM/GPRS

integrated phone with Bluetooth

7510
75XX
7520
7730
77XX

7750
7780

medium 240x160
iDEN
pixel colour

integrated phone with

integrated two-way radio

speakerphone,

integrated phone with speakerphone,

integrated two-way radio, GPS and
Bluetooth

900/1800/1900 MHz GSM/GPRS

large
240x240
800/1900 MHz CDMA2000 1x
pixel colour

integrated phone

850/1800/1900 MHz GSM/GPRS

Page 37 of 50

Table 3: Blackberry 7000 Series with Semi-Full keyboard using predictive wording technology
Family

Model

Screen

Network

Notes

Carriers

7100t
7105t
850/900/1800/1900 MHz
GSM/GPRS

7100r
"Charm"

7100v

large
240x260
colour

Airtel, Vodafone, Twith integrated phone Mobile

with
speakerphone,
Bluetooth

7100g[2]
O2
(UK),
(Ireland)

7100x

7130

7100i

iDEN

7130e

800/1900 MHz CDMA2000

1x and EV-DO

7130c
7130g
7130v

large
240x260
colour

850/900/1800/1900 MHz
GSM/GPRS/EDGE

O2

with integrated phone

with
speakerphone, Nextel and Telus and
Bluetooth, Push-to-talk, SouthernLINC
GPS, 64MB
Verizon
Wireless,
Sprint, Telus, Alltel,
and Bell Mobility
with integrated phone AT&T
with
speakerphone,
Bluetooth
O2
(UK),
(Ireland), Airtel

O2

Vodafone

Page 38 of 50

Table 4: Blackberry Pearl Series

850/900/1800/1900 MHz
GSM/GPRS/EDGE

Rogers Wireless, Cincinnati Bell, AT&T,

new trackball interface, 1.3 Vodafone, Orange (UK), T-Mobile
MP camera, speakerphone, (UK/US), O2 (UK), O2 (Ireland) and
Bluetooth, microSDHC (to Vodafone (Ireland),Telcel (Mexico),
8GB with handheld code 4.5), Vodafone and TIM (Italy), Vodafone and
polyphonic ringtones, media Essar (India), Airtel (India), Mobily
player
(Saudi Arabia), Mobilink (Pakistan),
MTN (Nigeria) and Ufone (Pakistan).

850/900/1800/1900 MHz
GSM/GPRS/EDGE

trackball interface, 2 MP
camera,
speakerphone,
Bluetooth,
external
Vodafone, O2 (UK), O2 (Ireland) & TmicroSDHC (to 8GB with
Mobile.
handheld
code
4.5),
polyphonic ringtones, media
player, GPS

850/900/1800/1900 MHz
GSM/GPRS/EDGE

trackball interface, 2 MP
camera,
speakerphone,
Bluetooth,
external
O2 (UK) and AT&T Mobility & TmicroSDHC (to 8GB with
Mobile (USA).
handheld
code
4.5),
polyphonic ringtones, media
player, Wi-Fi

800/1900 CDMA/EVDO

Trackball Interface, 2MP

Camera,
Speakerphone,
Bluetooth, microSDHC (to Bell Mobility, Telus Mobility, Sprint,
8GB with handheld code 4.5), Verizon Wireless,Alltel, US Cellular
Polyphonic/MP 3 ringtones,
Media Player, GPS

Internal Display:
240 x 320 pixels
(1/4 VGA) 65K
850/900/1800/1900 MHz
8220 Pearl Flip colours. External
GSM/GPRS/EDGE
Display: 128 x
160 pixel 65K
colours

trackball interface, 2 MP
camera,
speakerphone,
Bluetooth,
external
O2 (UK) & T-Mobile (USA), Tim Italy,
microSDHC (up to 16GB),
Telus Mobility & Rogers Wireless
polyphonic ringtones, media
(Canada).
player, "Clamshell" form
factor, 128MB flash memory
Wi-Fi

8100

8110
240x260
with
65K colours

8120

Pearl"

8130

Internal Display:
trackball interface, 2 MP
240 x 320 pixels
camera,
speakerphone,
(1/4 VGA) 65K 800/1900 MHz CDMA2000 Bluetooth,
external
8230 Pearl Flip colours. External [1xRTT] networks
MHz microSDHC (up to 16GB), Verizon (USA).
Display: 128 x 1xRTT/EVDO
polyphonic ringtones, media
160 pixel 65K
player, "Clamshell" form
colours
factor, 128MB flash memory

Page 39 of 50

Table 5: Latest Blackberry Models: Curve, Bold and Storm

Airtel (India), Vodafone
(India),
Etisalat
(UAE),
AT&T, Mobilink (Pakistan),
Rogers Wireless, O2 (UK),
O2 (Ireland) .

8310

"Curve"
"Bold"

8320

"Storm"
(a.k.a.
Thunder)

8330

Trackball
interface,
2.0
Megapixel
camera,
Speakerphone,
Bluetooth,
internal microSDHC (to 8GB
with handheld code 4.5),
Polyphonic Ringtones, Media
Player, GPS.

850/900/1800/1900 MHz
GSM/GPRS/EDGE/Wi-Fi

Dual-band
800/1900 MHz
CDMA2000 1X EV-DO networks

Vodafone (Germany, The

Netherlands), AT&T, SFR
(France), Rogers Wireless,
M1/Vodafone (Singapore),
Bouygues Telecom France,
Vodafone (UK), O2 (UK),
O2 (Ireland) , T-Mobile
(Slovakia).

T-Mobile (USA),
(Slovakia)

Orange

iDEN, Wi-Fi

8350i

8900

Trackball
interface,
2.0
Megapixel
camera,
Speakerphone,
Bluetooth,
Telus Mobility, Bell Mobility,
internal microSDHC (to 8GB
Alltel,
Sprint,
Verizon
with handheld code 4.5),
Dual-band
800/1900 MHz Polyphonic Ringtones, Media Wireless. US Cellular
CDMA2000 1X EV-DO networks Player, GPS, WiFi, next
generation OS (4.6)
iDEN, Wi-Fi
Trackball interface, 3.2 MP
camera + flash + autofocus,
speakerphone, Bluetooth 2.0,
WiFi 802.11 a/b/g, UMA, Sprint Nextel
GPS, external microSD (to
16GB), 3.5 mm stereo audio
jack

(Javelin) 850/900/1800/1900 MHz

GSM/GPRS/EDGE

"Curve"
"Bold"
"Storm"
(a.k.a.
Thunder)

9000

Trackball interface, 2.0 MP

850/900/1800/1900 MHz
camera,
speakerphone,
GSM/GPRS/EDGE
+
T-Mobile (USA & Germany),
Bluetooth, Wi-Fi 802.11
UMTS/HSDPA (DoCoMo model
AT&T, Rogers (Canada),
a/b/g,
GPS,
external
features
additional
800mhz
Orange (UK), O2 (UK) .
microSDHC
(to
16GB),
WCDMA frequency[1]) + WiFi
3.5 mm stereo audio jack

CDMA
EV-DO
GSM/GPRS/EDGE
850/900/1800/1900,
HSDPA 2100
9530

Clickable
Touchscreen
interface, 3.2 MP camera, AT&T, Rogers, Turkcell,
Bluetooth,
1GB
Internal Telenor (Pakistan), Airtel
UMTS
Flash, 3.5 mm stereo audio DoCoMo, O2 (UK)
jack, microSD

800/1900,

Verizon, Vodafone, Telus

(Canada), Bell (Canada).

Page 40 of 50

Picture 1: Amazon.com partnering with AT&T to sell Blackberry Bold

Picture 2: Blackberry Google Adwords promotion by Verizon.

Page 41 of 50

Picture

3:

The

Blackberry.com

website,

showing

the

Blackberry

Bold

and

Curve.

Exhibit 4: Phase of smartphones product life cycle

Page 42 of 50

Page 43 of 50

7.7

RIMs Historical Financial Statement

Annual Income Statement (All dollar amounts in millions except per share amounts.)
Feb 05
Feb 06
Feb 07
Feb 08

Feb 09

Revenue
Costs of
Goods Sold

1,350.4

2,065.8

3,037.1

6,009.4

11,065.2

(636)

(925)

(1,379)

(2,929)

(5,968)

Gross Profit
Gross Profit
Margin
SG&A
Expense

714.5

1,140.6

1,657.8

3,080.6

5,097.3

52.90%

55.20%

54.60%

51.30%

46.10%

(512.70)

(476.90)

(488.60)

(813.10)

(1,362.30)

(101.00)

(158.00)

(236.00)

(359.00)

(685.00)

66.8

85.9

126.4

177.4

327.9

34.0

419.8

806.8

1,731.2

2,722.1

2.50%

20.30%

26.60%

28.80%

24.60%

37.1

66.2

52.1

79.4

78.3

--

--

--

--

--

71.2

486.1

858.9

1,810.5

2,800.4

-142.2

104.0

227.4

516.7

907.8

213.4

382.1

631.6

1,293.9

1,892.6

--

--

--

--

--

213.4

382.1

631.6

1,293.9

1,892.6

15.80%

18.50%

20.80%

21.50%

17.10%

0.4

0.7

1.1

2.3

3.3

R&D Expense
Depreciation &
Amortization
Operating
Income
Operating
Margin
Nonoperating
Income
Nonoperating
Expenses
Income Before
Taxes
Income Taxes
Net Income
After Taxes
Discontinued
Operations
Total Net
Income
Net Profit
Margin
Diluted EPS
from Total Net
Income ($)

Page 44 of 50

Annual Balance Sheet (All dollar amounts in millions except per share amounts.)
Feb 05
Feb 06
Feb 07
Feb 08
Cash
1,037.8
635.1
987.2
1,605.1
Net
Receivables
391.1
441.9
634.4
1,340.1
Inventories
92.5
134.5
255.9
396.3
Other Current
Assets
22.9
45.0
41.7
135.9
Total Current
Assets
1,544.3
1,256.6
1,919.3
3,477.4
Net Fixed
Assets
210.1
326.3
487.6
706.0
Other
Noncurrent
Assets
Total Assets
Accounts
Payable
Short-Term
Debt
Other Current
Liabilities
Total Current
Liabilities
Long-Term
Debt
Other
Noncurrent
Liabilities
Total Liabilities

Feb 09
1,518.2
2,453.7
682.4
187.3
4,841.6
1,334.7

866.6
2,621.0

729.3
2,312.2

682.1
3,088.9

1,327.9
5,511.2

1,925.1
8,101.4

614.4

257.5

517.9

1,436.8

2,061.5

0.2

0.3

0.3

0.3

--

16.2

21.0

28.5

37.2

53.8

630.8

278.7

546.6

1,474.4

2,115.4

6.5

6.8

6.3

7.3

--

-637.3

27.9
313.4

52.5
605.5

95.9
1,577.6

111.9
2,227.2

Preferred
Stock Equity
Common
Stock Equity
Total Equity

--

--

--

--

--

1,983.7
1,983.7

1,998.8
1,998.8

2,483.5
2,483.5

3,933.6
3,933.6

5,874.1
5,874.1

Shares
Outstanding
(mil.)

189.5

186.0

185.9

562.7

566.2

Page 45 of 50

Annual Cash Flow Statement (All dollar amounts in millions except per share amounts.)
Feb 05
Feb 06
Feb 07
Feb 08
Net Operating
Cash Flow
278.0
150.1
735.7
1,576.8
Net Investing
Cash Flow
-878.1
67.3
-364.6
-1,153.9
Net Financing
Cash Flow
54.0
-368.2
-153.7
80.4
Net Change in
Cash
-546.1
-150.8
217.6
507.3
Depreciation &
Amortization
Capital
Expenditures
Cash
Dividends Paid
Free Cash
Flow

Feb 09
1,451.8
-1,823.5
25.4
-348.9

66.8

85.9

126.4

177.4

327.9

-109.4

-178.7

-254.0

-351.9

-833.5

--

--

--

--

--

168.6

-28.6

481.7

1,224.9

618.3

Page 46 of 50

7.8

RIM DCF Valuation

Cost of Capital
Equity Bata
Risk Free Rate (Rf)
Expected Market Rate RM
Equity Market Risk Premium(Rm-Rf)
Cost of Equity/WACC
Terminal Growth Rate
Shares Outstanding

2.34
3.45%
8.00%
4.55%
14.10%
5.00%
564.9 million shares

Yahoo Finance
10 Year Treasure Bond
Yield(yahoo)
S&P 500 Averate Return

DCF Forecasting Assumption

Fiscal Year End Date
Sales Growth
Cost of Goods Sold/Sales
R&D/Sales
SG&A/Sales
Dep&Amort/Avge PP&E and Intang.
Interest Expense/Avge Debt
Non-Operating Income/Sales
Effective Tax Rate

Fiscal Year End Date

Income Statement (in thousands
dollars)
Sales (Net)
Cost of Goods Sold
Gross Profit
R&D Expense
SG&A Expense
EBITDA
Depreciation & Amortization
EBIT
Interest Expense
Non-Operating Income (Loss)
EBT
Income Taxes
Net Income Before Ext. Items

Net Income (available to

common)

Actual
2/28/2009
84.1%
53.9%
6.2%
13.5%
10.2%
0.0%
0.7%
32.4%
Actual
2/28/2009

11,065,186
(5,967,888)
5,097,298
(684,702.00)
(1,495,697.00)
2,916,899
(194,803)
2,722,096
78,267
2,800,363
(907,747.0)
1,892,616

1,892,616

Actual

Forecast
2/28/2010
30.0%
53.9%
6.2%
13.5%
10.2%
0.0%
0.7%
32.4%
Forecast
2/28/2010

14,384,742
(7,758,254)
6,626,487
(890,113)
(1,944,406)
3,791,969
(297,058)
3,494,911
0
101,747
3,596,658
(1,165,869)
2,430,789

2,430,789

Forecast

Forecast
2/28/2011
40.0%
53.9%
6.2%
13.5%
10.2%
0.0%
0.7%
32.4%

Forecast
2/28/2012
31.3%
53.9%
6.2%
13.5%
10.2%
0.0%
0.7%
32.4%

Forecast
2/28/2011

Forecast
2/28/2013
22.5%
53.9%
6.2%
13.5%
10.2%
0.0%
0.7%
32.4%

Forecast
2/28/2012

Forecast
2/28/2014
13.8%
53.9%
6.2%
13.5%
10.2%
0.0%
0.7%
32.4%
Forecast
2/28/2013

20,138,639
(10,861,556)
9,277,082
(1,246,158)
(2,722,169)
5,308,756
(402,965)
4,905,791
0
142,446
5,048,237
(1,636,403)
3,411,834

26,431,963
(14,255,792)
12,176,171
(1,635,582)
(3,572,846)
6,967,742
(543,584)
6,424,159
0
186,960
6,611,119
(2,143,016)
4,468,103

32,379,155
(17,463,346)
14,915,809
(2,003,588)
(4,376,737)
8,535,485
(686,458)
7,849,027
0
229,026
8,078,053
(2,618,528)
5,459,525

3,411,834

4,468,103

5,459,525

Forecast

Forecast

Page 47 of 50

Forecast

Fiscal Year End Date

Cash Flow Statement (in
thousands dollars)
Cash From Operations
Cash From Investing
Cash From Financing
Net Change in Cash
+ Beginning Cash Balance
= Ending Cash Balance

2/28/2009

2/28/2010

2/28/2011

2/28/2012

2/28/2013

1,293,523
(1,420,756)
40,338
(86,895)
1,605,107
1,518,212

2,399,008
(1,274,994)
(668,551)
455,464
1,518,212
1,973,676

3,244,812
(2,098,054)
(357,287)
789,470
1,973,676
2,763,146

4,388,263
(2,397,587)
(1,127,193)
863,483
2,763,146
3,626,629

5,556,848
(2,438,491)
(2,302,365)
815,992
3,626,629
4,442,620

Page 48 of 50

8 EndNotes

Page 49 of 50

Source: Business Week, April4, 2008, Interview with RIM founder, Mike Lazaridis,
http://www.businessweek.com/innovate/content/apr2008/id2008044_416784.htm?campaign_id=rss_daily
2

RIM records all employee calls, March 04,2009, interview with RIMs CIO Robin Bienfait interview with ZDNet.com.au
in Sydney, http://www.zdnet.com.au/news/communications/soa/RIM-records-all-employee-calls
3

Managing Change through Networks and Values, M, Johnson-Cramer, S Parise, R. Cross, California Management Review,
Vol 49, NO. 3, Spring 2007, page 103
4

Fast Company, Rapid Motion by Bill Breen posted on 12/29/2007 From Issue 49 |(July 2001),
http://www.fastcompany.com/magazine/49/motion.html?page=0%2C3
5

Canada's 10 Most Admired Corporate Cultures of 2006 , Waterstone Human Capital,

http://www.canadasmostadmired.com/
6

JP Morgan

JP Morgan, page 4

RIMs secret weapon: Carriers profitability and lower bandwidth consumption. April 3rd, 2009,
tttp://blogs.zdnet.com/BTL/?p=15740