Interesting news has come from Bloomberg, re: Research in Motion, Ltd (NASDAQ GS:RIMM) Squeeze On Suppliers. RIMM has experienced revenue growth this last quarter, and has always maintained a focus not only on growth, but the margins as well, especially as it has broken more into the comsumer market from the corporate side of the spectrum. Investors were worried as RIM went from being the Business Phone of choice, to reaching out to a consumer based market as well, appealing to the consumers in the smart phone industry.
Gross margin is anticipated to around 44 percent, it currently is at forty percent. Investors have been concerned with the recent numbers. RIMM’s transitioning from the high spending businesses to a much more costly consumer smart phone market has shrunk the margin 10.7 percent.
The company is predicting and looking forward to a rebound in rise of margins this quarter.
Co-Chief Executive Officer Jim Balsille of Research in Motion Ltd stated that the Blackberry maker is lowering supply costs as the expanding growth will give them enough of a pull to push for deals in this recession. He shared during an interview in Waterloo, Ontario, that what makes an important customer is being a company strong in growth in a challenging environment. He said it is probably assisting the company with being able to strike better deals from the companies manufacturing the equipment for the phones.
With smaller expenses and new sources of revenue, such as the App World Application Store, it might be what RIM needs to bring up the margins and rise again. Some of the manufactures have also pushed back on their suppliers to help with the costs.
In a market experiencing the worse global recession since World War 2, businesses must meet the changes in order to thrive.
RIM’s main five suppliers make up 90 percent of production costs. It’s five main suppliers are Elcoteq, SE; Jabil Circuit Inc.; Marvell Technology Group, Ltd.; Multi-Fineline Electronix Inc.; and Qualcomm Inc.