Research In Motion earned almost US$1-billion from the service last quarter, one-fifth of its total sales, from its network infrastructure that enables it to encrypt, compress and push data. Northern Securities analyst Sameet Kanade believes RIM will be forced to slash the fees it charges carriers for BlackBerry service this year.
“We now firmly believe that RIM does not have the luxury of time on its side,” he wrote in a note to clients. Kanade is now cutting his rating on RIM stock to sell from speculative buy and chopped his price target to US$7 from US$24.
BlackBerry 10 and future 3G/4G PlayBook models will need new server component software called Mobile Fusion. This software also allows for competitor devices from Google and Apple to be managed. However, Kanade asserts both traditional software companies and carriers are introducing similar products at a lower cost. He estimates RIM gets roughly $5 a month per subscriber, but says it could fall to $2 per user by February 2013. Additionally, Kanade expects service revenue to fall 48% in the next two years.