updated 01:20 pm EDT, Mon April 13, 2009
RIM pressuring suppliers
BlackBerry smartphone maker Research In Motion's (RIM) co-CEO Jim Balsillie said the company's growth during the tough economy is allowing it to demand discounts from its suppliers, Bloomberg reported on Monday. The executive says that it's been attempting to mitigate the effects of the financial crunch by trimming the amount spent making the devices themselves. Five of RIM's biggest suppliers make up nearly 90 percent of its production costs, based on data sourced from Connexiti.
The official acknowledges the company's recent record shipments, which saw it push 7.8 million BlackBerries, and says this should make the cost-cutting acceptable given RIM's sheer value to these suppliers.
"Being a strong growth company in a challenging environment makes you an important customer," Balsillie says.
These suppliers will now need to put pressure on the companies they work with, though no specifics regarding RIM's requests have been revealed. Electronics manufacturer Elcoteq SE, which accounts for one third of RIM's costs, makes 20 percent of its annual sales with the smartphone designer. Another RIM supplier, Multi-Fineline, which makes flexible circuit boards for RIM, has experienced pricing pressure which it is extending to its own suppliers, spokesperson Lasse Glassen says.
Market and industry analysts feel RIM is well prepared for the effects of the global recession, as its recent launch of the BlackBerry App World will help bolster profits. While application developers get 80 percent of the royalty, RIM and wireless carriers each receive the remaining 10 percent. The company also announced in April that its gross margin will grow during the current quarter.
Balsillie adds that RIM will focus on its consumer business as aggressively as it did on the enterprise business in the past. Both are now about evenly split in terms of total sales.