Can Research In Motion Turn It Around Overseas?
In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue growth came from abroad. Today, that area makes up half of the S&P 500's growth.
And that number is growing. The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from abroad.
With that in mind, today we're looking at Canadian mobile company Research In Motion (NAS: RIMM) . We'll examine not only where its sales and earnings come from, but also how its sales abroad have changed over time.
Where RIM's sales were five years ago
Five years ago, RIM produced 65% of its sales within the United States.
Source: S&P Capital IQ.
Source: S&P Capital IQ.
Source: S&P Capital IQ.
Where RIM's sales are today
Today, America is still RIM's largest individual market, but its influence is shrinking. While the United States still contributed 39% of sales at the end of RIM's last fiscal year, its effect on RIM's business is rapidly fading.
More importantly, since the close of its last fiscal year in February, sales in the United States are absolutely plummeting.
Sales Growth Since February 2011 (3 Reported Quarters)
Source: S&P Capital IQ. Time period is RIM's fiscal third quarter divided by the last fourth quarter, which ended in Feb. 2011.
Taking RIM's American malaise even further back, the company has seen American sales plummet by an astounding 55% since August 2009, in a time when the overall American market has been booming behind growth in Apple (NAS: AAPL) and Google's (NAS: GOOG) mobile platforms. In that same time RIM's sales to "other" markets, including Latin America and Asia, ballooned by 329%!
However, that growth seems to be slowing. RIM has grown its international sales only 10% in the past year. The company has shown more resilience holding on to market share in Indonesia and Latin America, but even those markets are beginning to show the troubling stagnation that RIM's American sales displayed in 2009, before things began to crumble.
One last point to check is how RIM's footprint compares with some of its peers:
Geography With Most Sales
Percent of Sales
|Research In Motion||United States||39%|
|Nokia (NYS: NOK)||China||16%*|
|Microsoft (NAS: MSFT)||United States||54%|
Source: S&P Capital IQ. Data for last fully reported fiscal year.
*China is Nokia's largest reported segment; its highest sales are in its "other" category.
Even with this overseas growth, RIM has been unable to stem its bleeding market share. In 2009, the company was reported to control about 20% of the smartphone market; in the fourth quarter of 2011, RIM's share was cut down to about 9%.
In that same time, Apple bragged of stunning sales growth within China and raised its smartphone market share to 24% in spite of the iPhone's massive $660 average selling price. The army of Android phones has crushed RIM, especially on the consumer and low-price end, and now controls about 51% of the smartphone market. In the year ahead, Nokia will try making a run back at restoring its own wilted market share, which now stands at 11%, by adopting Windows Phone as its operating system.
The troubling scenario for RIM -- and one I believe will happen -- is that if the international growth that's been keeping the company's total sales from faltering begins dropping, then RIM could begin seeing its powerful base of 75 million subscribers begin to decline as existing RIM users churn to new smartphones. That's important, because RIM collects "services revenue" from wireless carriers for each RIM user. That services revenue is very high-margin and essentially accounts for all of RIM's profits. If that revenue stream begins drying up, RIM's fall will only accelerate.
While RIM might not be a roaring success story in the past year, other companies are seeing outsized growth around the world. In the past decade, emerging-market consumer spending grew 250%, leaving the growth rates of the U.S. and Europe in the dust. If you're an investor scanning the world for opportunities, look no further than our new report, "3 Companies Set to Dominate the World." In the report, Fool analysts select three companies who have an international growth opportunity that's simply stunning. The report is free but won't be available forever, so get your copy by clicking here today!
At the time this article was published Eric Bleekerowns shares of no companies listed above. You canfollow him on Twitterto see all of his technology and market commentary. The Motley Fool owns shares of Apple, Google, and Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Apple, Microsoft, Google, and Nokia and creating bull call spread positions in Apple and Microsoft. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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