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RIM sacrifices profits for more market share
Lower margins and profits may be the painful but necessary price that Research In Motion (RIM) has to pay to capture a bigger market share with new models of its BlackBerry smartphones.
- Reuters
- Published: 23:40 September 27, 2008
Toronto: Lower margins and profits may be the painful but necessary price that Research In Motion (RIM) has to pay to capture a bigger market share with new models of its BlackBerry smartphones.
RIM shares fell about 25 per cent on Friday to their lowest level in more than a year, a day after it warned that the costs of launching third-generation handsets like the high-end BlackBerry Bold would eat into its gross margins.
The components needed for the latest smartphones are expensive, RIM said, but that spending is necessary if the company is to continue growing its market aggressively.
"It is understandable that margins are going to be pressured when you are introducing several new products with more expensive components," said First Analysis Securities analyst Scott Pope. "Of course, this is essentially a requirement given the increased competition in the smartphone industry."
RIM has held its own despite competitive threats from the iPhone and Mot-orola and Nokia.
One of the reasons for its success has been the sturdy, reliable and increasingly fashionable design, both on the outside and inside the BlackBerry.
But such competition can be costly. And to continue its torrid pace of growth, RIM has to make its increasingly feature-rich handsets attractively priced.
That, in turn, means the the company is limited in its ability to pass along higher component costs to its customers.
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