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Pre-BlackBerry 10 Jitters

Stocks in this article: RIMM

1. Data compression fading in importance:

RIM's problem with data compression is the same problem as selling electric cars when gasoline is falling from $4 per gallon to $3 per gallon and the next stop may sell for $2 per gallon. Just as an electric car might have saved on your gasoline bill, it's pointless if gasoline is plentiful and getting cheaper.

This is not the case everywhere in the world, but it is in the U.S., Korea, Japan and increasingly in more countries. As a result, BlackBerry's market share in the U.S. has plummeted. However, in much of Africa, Latin America and South Asia, data remains relatively scarce, and this data compression gives RIM a strong pricing advantage there.

RIM has 79 million subscribers, slightly above where it was a year ago. This is despite the number of subscribers in the U.S. and a couple of similarly data-abundant countries plummeting. That's because data remains scarce, and hence RIM's data compression advantage remains strong in many parts of the world.

2. Security and encryption:

There are two kinds of markets here: consumer and enterprise. Let's take these in turn:

A. Consumers

I'm sorry, but the typical consumer cares absolutely nothing about security to a degree. We are talking about people who are posting photos of themselves on the Internet here, folks. The concept of privacy is generally distinctly different for a 20-year-old than for a 60-year-old these days.

You can call this RIM's "47% problem." Mitt Romney said talking about tax cuts to people who don't pay taxes doesn't go very far. This is exactly RIM's issue about talking about security and encryption to people who have been smitten by an exhibitionist culture and think the world is dying to see pictures of their food, cats and Lord knows what else.

In this sense, RIM faces a demographic and socio-economic problem not akin to the Republican party, or at least so the story goes.

B. Enterprise

Here, the story is different -- but still a little problematic. I will divide the enterprises into two groups:

(1) Some, mostly smaller, enterprises just don't care as much about security/encryption. These are companies that were founded, for the most part, in the BYOD (bring your own device) world, where every new employee walked in the door with an iPhone and there was never any corporate device (BlackBerry) program.

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