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Pressure on RIMM to reduce subscriber service fees

Research In Motion Limited (USA) (NASDAQ:RIMM) is under pressure as the sales are dripping with each quarter and now there are also problems with its carriers like AT&T etc. with the carriers demanding a cut in the subscriber service fees (a charge levied by Research In Motion Limited (USA) (NASDAQ:RIMM) on the subscribers for using its services like the blackberry messenger etc.).

Thorsten Heins, CEO Research In Motion Limited (USA) (NASDAQ:RIMM) will launch its Blackberry 10 operating system on January 30th in six countries worldwide, said in a conference call held on December 20 with few analysts that Research In Motion Limited (USA) (NASDAQ:RIMM) is facing huge pressure from its carriers to reduce its fees to stay intact with the demands of growing markets.

The subscriber service fees was earlier absorbed by the carriers as the demand for Blackberry devices was at all time high and thereby with the high sales and margins on sales of blackberry devices the carriers were able to offset the subscribers service fees However in the last few quarters the sales of Research In Motion Limited (USA) (NASDAQ:RIMM)  have been dripping and in last quarter sales in markets like U.S., U.K. and Canada have dropped by a drastic 53% compared to the same quarter last year to $949,according to December 21 company report.

Research in Motion Limited (USA) (NASDAQ:RIMM)’s revenue model was gaining income by selling the Blackberry devices to the subscribers and then charging subscriber fees from the subscriber base. “It’s changing and it’s under pressure,” Steven Li, an analyst at Raymond James, said for the service model of Research in Motion Limited (USA) (NASDAQ:RIMM). He also said that Research in Motion Limited (USA) (NASDAQ:RIMM)’s revenue decline will range anywhere from 34-67% year after year. This statement could be validated if we see that 36% of total sales revenue of Research in Motion Limited (USA) (NASDAQ:RIMM) last quarter i.e. around $974 million came from subscriber service fees out of the total sales revenue of $2.74 billion.

Earlier this quarter it was being assumed that Research in Motion Limited (USA) (NASDAQ:RIMM) would double its sales when it announced the launch of Blackberry 10 O.S. However, this did not materialize as data shows that instead of buying the already existing Blackberry devices the consumers are now waiting for Blackberry 10 OS and then decide whether they want to go in for Blackberry or not.

All in all if we see it in nutshell Research In Motion Limited (USA) (NASDAQ: RIMM)  the makers of Blackberry Smartphone will have to rethink and redevelop strategies before making their next move in the developed markets of U.S, UK or Canada as well as emerging markets like that of India.

Shares of Research In Motion Limited (USA) (NASDAQ:RIMM) were down by 2.75% to close at $10.61.

Published by Benjamin Roussey

Benjamin Roussey is from Sacramento, California. He has two master’s degrees and served four years in the U.S. Navy. His bachelor’s degree is from CSUS (1999) where he was on a baseball pitching scholarship. His second master’s degree is an MBA in Global Management from the University of Phoenix (2006). He has worked for small businesses, public agencies, and large corporations. He has lived in Korea and Saudi Arabia where he was an ESL instructor. Benjamin spends his time in between Northern California and Cabo San Lucas, Mexico, committing himself to his craft of freelance and website writing. http://www.facebook.com/ben.rouss