This Recent Development Might Add to RIMM’s Sorrows

Rita is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Strong winds of change are breezing across the smartphone space. With the entry of Apple’s (NASDAQ: AAPL) iPhone and Google’s (NASDAQ: GOOG) Android, Research In Motion (NASDAQ: BBRY) and Nokia (NYSE: NOK), who were once the undisputed champions in their respective target markets, were tossed from the top to the bottom of the pyramid. However, things have changed a little since then. Nokia very recently started recovering from the fall, thanks to its Lumia and Asha range of smartphones, which recorded 4.4 million and 9 million plus sales, respectively. Meanwhile, the BlackBerry maker is now waiting for its big day, Jan. 30 - the day BlackBerry 10 hits the streets.

RIM has finally made it to the opportunity of a second chance. Up until now RIM was struggling to survive by selling low-end BlackBerry Curve phones, and has been hugely dependent on its BB 7 OS. The company has lost market share in the past few quarters as rapidly as a forest fire spreads, falling from 11% in Q3 2011 to 5.3% in Q3 2012.

<img src="/media/images/user_13114/gartner-nov-2012-os_large.jpg" />

With the launch of the new BB platform, RIM now will get an opportunity that might set things rolling for the company once again. The BlackBerry maker has spent a lot of time (and a lot of dollars too) to get its newest platform ready and running. Packed with some pretty interesting features and a fresh look, the offering stands to attract huge attention and help the company slowly gain back what it has lost. The company is also getting support from four major US carriers – Verizon, AT&T, Sprint and T-Mobile – as all of them have agreed to support the latest BB10 devices.

So, things are looking good for RIM, right? Well, no--just when the company was about to get a chance to bounce back, a development took place that might just add to RIM’s sorrows. According to Bloomberg, the South Korean smartphone giant and the world’s biggest phone maker, Samsung, announced its plans to launch smartphones powered by the latest Tizen operating system later this year. In an e-mailed statement to Bloomberg, the company said “We plan to release new, competitive Tizen devices within this year and will keep expanding the lineup depending on market conditions.” Soon after the announcement, the internet was flooded with leaked pictures of the new OS, and there are rumors that the first Taizen-powered handset will be called the Samsung I9500, and will be available by the first quarter of 2013.

<img src="/media/images/user_13114/taizen-samsung-i9500_large.jpg" />

(Source: Sammobile.com)

Tizen is an open source software platform meant for smartphones, tablets, netbooks, in-vehicle infotainment devices, and smart TVs, offering a consistent user experience that consumers can take from device to device. According to the official website, the project resides within the Linux Foundation and is governed by the Technical Steering Group, which comprises mighty corporations such as Intel (NASDAQ: INTC), Samsung, Vodafone and China’s Docomo.

The operating system is the answer to Samsung’s need to reduce its dependence on Google and Intel’s decision to enter the smartphone space. Selling 55 million smartphones in Q3 2012, Samsung is presently the market leader with a command of over 32.5% of global smartphone market sales, which also makes it the top Android powered smartphone seller. Its flagship products, such as the Galaxy S III and the Galaxy Note II, are doing very well and contributing hugely to both Samsung and Google’s growth. However, the issue here is that Samsung is heavily dependent on Google, and this is not very desirable. The phone maker is looking at deleveraging Google by working on a new OS.

Google has plans of its own to enter the smartphone handset market, and that’s why it closed the Motorola deal. Without Motorola in the scene, both Google and Samsung were equally dependent on each other. But now, the balance of power is lost as the deal reduced Google’s dependence on Samsung. In order to counter the situation, Samsung joined hands with Intel and started work on Tizen.

On the other hand, as we already know, for a long time Intel has been trying to get into this highly profitable sector, but has been facing stiff barriers. Earlier, it had partnered with Lava and Lenovo and introduced smartphones built on its chips. But they failed to create even a ripple in the smartphone market. However, recently the chipmaker had some success, as Lenovo decided to launch K900, a smartphone build on Intel’s latest Clover Trail+ processor. This is where Tizen becomes crucial for Intel. Once the platform is ready and running, it will result in huge scope for Intel and mark its strong entry into the space.

As a result of this recent development, RIM’s chances to make it big with the BB10 might get further compromised. BlackBerry was already up against the iOS and the Android. Even Microsoft’s Windows Phone 8 is a big hurdle for RIM. Nokia and Microsoft used the 2012 holiday season to boost the popularity and sales of the Lumia devices, and both companies are happy about their efforts. RIM missed out on the opportunity when it decided to launch the new platform in the first quarter of 2013. The only point which I felt justified this was that by the time BB10 would be launched, the hype about iPhone 5 and Lumia 920 would settle down and there won’t be anyone to steal RIM’s thunder. But, with Tizen in the picture, the situation may not turn out as planned.

Some may say Tizen, being a totally new platform, will suffer from a lack of apps, and this might restrict its growth. However, even BB10 will be a totally new platform, and the old BB apps will not work on it. Thus, that’s a problem common to both companies. Since Samsung has a special interest in the OS, the South Koran giant may invest heavily in making the platform and its new devices relevant, just like it did with its Galaxy fleet of Android smartphones. The company allots a huge budget for ads and promotions, and it uses all its muscles to ensure success. Samsung has bought its way to fame before, and surely it won’t think twice about doing it once again.

Secondly, whether Tizen succeeds or not, it might curb RIM’s growth prospects. Samsung is already a hugely popular brand and it has set a brand perception in the minds of consumers. When it starts selling handsets of Tizen, the chances are that there will be consumers flocking to it. In such a situation, RIM will need to fight another platform. Again, chances are high that Samsung’s Tizen smartphones will be more affordable than the premium BB10 devices – both in terms of purchasing and monthly use. This being the situation, Samsung will continue to benefit from huge user base and RIM will continue to cater to only a selected class of users.

Right now, the only point in favor of RIM is that the BlackBerry 10 is going to be launched in 2 weeks time, on Jan. 30, which will give RIM a two months lead, assuming Tizen will be launched at the end of the first quarter. However, since there has been no official announcement about the launch date of Samsung’s Tizen smartphones, in case the devices are launched sometime during the later part of the year, RIM will get some more time to secure its market presence.


analyse360degree has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and Intel. The Motley Fool owns shares of Apple, Google, and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus