Inside the BlackBerry Bold

Research firm iSuppli says it costs Research In Motion $169.41 to make the smartphone, lower than some Street estimates—and promising for RIM's profit margins

By Arik Hesseldahl

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The smartphone race between upstart Apple (AAPL) and incumbents like Research In Motion (RIMM) is well under way. Picking winners has as much to do with what's inside these advanced wireless devices as the fancy features evident on the outside.

That's why market research firm iSuppli did an analysis of the guts of the Bold, one of the recent additions to Research In Motion's lineup of BlackBerry smartphones. The firm's so-called teardown analysis of the Bold shows that the parts and materials used to make the phone cost $158.16, and that assembly and testing add another $11.25, for a total cost of $169.41.

The Bold, already on the market with wireless carriers in Britain, France, Canada, India, and other markets, is expected to debut soon in the U.S. with wireless carrier AT&T (T) at a price of about $300 for a two-year contract. Rogers Wireless (RCI) in Canada sells the Bold for the Canadian equivalent of about $254 with a contract. AT&T hasn't yet confirmed that price, and a spokesman declined to comment. A RIM spokeswoman had no comment.

Pricey to Take on Apple

RIM is certainly spending more on the components of its most recent line of phones, a reflection of the high price of competing with Apple. RIM spent $103 in materials and assembly cost for the Curve, RIM's older mainstream device that works on an older network technology than the Bold. RIM, based in Waterloo, Ont., introduced the Bold among three new devices going head-to-head with Apple's iPhone and devices like the T-Mobile (DT) G1 that run Google's (GOOG) Android operating system.

Still, the analysis from iSuppli could lessen concerns over how much RIM's margins may narrow as it boosts spending to defend its turf. "That's a nice price," says Charles Wolf, an analyst at Needham & Co. in New York. Assuming RIM sells the device to carriers at about $350, the component costs imply a gross margin of about 45%, in keeping with the gross margins on other RIM devices, he says. The cost estimates from iSuppli don't include several expenses, including software, marketing, and shipping, and so don't give a precise indication of the device's margins.

RIM indicated recently that margins would come under pressure as the company packs new phones with added features. The company said on Sept. 25 that gross margins would be closer to 47% in the current quarter and in the "mid-40s" beyond that, compared with 50.7% in the first two quarters of the year (BusinessWeek.com, 9/26/08). The company's shares have dropped more than 60% from a historic high of 148.13 on June 19, closing at 55.75 on Oct. 15.