Inside the BlackBerry Bold

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Other Devices Likely to Hit Margins

The other two new devices from RIM are the Pearl Flip, RIM's first flip-design phone, and the Storm, a touchscreen device that dispenses with the traditional QWERTY keyboard that has been a BlackBerry feature (BusinessWeek.com, 10/8/08). "It would appear to me that it's the other new RIM devices, the Flip and Storm, that are going to be dragging the overall gross margins down," says Wolf.

He may be onto something. Francis Sideco, an analyst at iSuppli, also speculates that the Storm will carry a higher materials cost. "Once you start getting into touchscreens, that display is going to have a lot of silicon and a lot more programming behind it to make it work," he says.

On Oct. 15, Wolf upgraded his rating on RIM to hold from underperform, resetting his target price at 77, after downgrading it before over concerns that the iPhone would eat into RIM's sales. "Recent data suggest that iPhone sales are in fact materially higher than initial forecasts," he wrote in a research note. "However, we now believe that RIM's share price more than compensates for any slowdown in the growth of BlackBerry sales in the consumer market that might occur in the November quarter."

Insight into RIM Suppliers

Analyst Samuel Wilson of JMP Securities is also turning more bullish on RIM. On Oct. 8, Wilson reiterated his outperform rating on the stock and set a price target of 80. "I was expecting a cost of about $200 or so," he said of iSuppli's cost estimate. Investors have been driving the stock down assuming that gross margins at RIM are going to consistently spiral downward quarter after quarter, but that's unlikely as components become cheaper over time and volumes ramp up, Wilson says. "This definitely suggests that the Street has been too pessimistic about RIM's gross margins going into 2010," he says.

The teardown also gives insight into RIM's stable of suppliers. The most costly component is a chip from Marvell Technology (MRVL) that handles both the wireless communications and the applications running on the device and costs a little more than $34. The second-most costly component is the screen, supplied by Samsung, which costs $16. Samsung also supplied memory chips that cost another $10.45. The handset's internal camera came from OmniVision Technologies (OVTI) and cost a little less than $10. Two parts from Texas Instruments (TXN) cost a combined $7.72, while SiRF Technology (SIRF) supplied a $5 GPS chip.

The materials cost is similar, if slightly lower, than iSuppli's estimate of the cost of the iPhone 3G, which is $174.33 (BusinessWeek.com, 7/15/08). That estimate was lower than the $226 cost estimate on the first iPhone, released in 2007.

Hesseldahl is a reporter for BusinessWeek.com.