Blackberry 10 takes on iOS, Jelly Bean & Apollo
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On June 28th Research In Motion (NASDAQ: BBRY) will announce this fiscal quarter's earnings, however last week investors got a preview of what was to come when RIM took the unusual step of warning that it may lose money. RIM also froze trading on their stock for 15 minutes while the news was released. Over the last year RIM has lost over 80% of its stock market value and the pain does not look like it is anywhere near over. RIM has been profitable since 2003 and this time last year made close to one billion in quarterly profit.
RIM currently has just over two billion dollars in cash but it is now looking at a quarterly loss and market share deterioration. RIM also announced that they have hired J.P Morgan and RBC Capital Markets to help them evaluate their strategic options, which could include selling off parts of the company and will include significant layoffs this year. In the first quarter of 2012 RIM's Blackberry smartphones had just 6.4% of Smartphone market share compared to 13.8% in the first quarter of 2011. With sales plummeting and cost cutting measures such as layoffs in full swing, RIM is pinning the company’s future on the next version of their Blackberry operating system, Blackberry 10.
Unfortunately with Blackberry 10 slated to launch later this year it will go head to head with the rumored launch of the iPhone 6 and or iOS 6, which Apple (NASDAQ: AAPL) may launch this summer or fall. Should Apple release a new version of their operating system and a new 4G LTE equipped larger iPhone, as some rumors have suggested, Balckberry 10's initial sales could be lower than they should have been.
Additionally, Google (NASDAQ: GOOG) has its developer conference, Google I/O, in June and there we may see the next generation of the Android operating system Jelly Bean, or Android 5.0 (or 4.1 as some reports have indicated). There have also been murmurings that we will see a full line of stock Android devices unveiled and sold directly by Google under their Nexus brand. If these Nexus devices are available on most carriers running stock Android 4.0 Ice Cream Sandwich or the new Jelly Bean they may also cut into sales of Blackberry 10 devices. Google’s Android and the Apple iPhone combined make up over 80% of the smartphone sales, with Android on top at 59% and Apple in second with 23% compared to Blackberry’s 6.4%.
Even Microsoft’s (NASDAQ: MSFT) Windows Phone, which currently is somewhere at or below 3% of global smartphone sales (though in China they are at 7%, above Apple’s 6%, at least according to Microsoft) could pose a threat to the success of Blackberry 10. Microsoft is currently working on the next generation of its mobile operating system Windows Phone 8 codenamed Apollo, and they, like Apple and Google will showcase their latest innovation at a developer’s conference on June 20th and 21st. With the recent conversion of Nokia to Windows Phone, Microsoft gained an excellent hardware partner. Further, with close to sixty billion dollars in cash, Microsoft can afford to push Windows Phone without seeing a profit for years. Not to mention the fact that Microsoft has licensing deals with 70% of Android handset makers that Goldman Sachs estimated could bring in 444 million dollars for Microsoft. Microsoft could also leverage its corporate IT contracts and products to push Windows Phone in the corporate and government world, a traditional strong hold of Blackberry.
Blackberry is still strong within the government.Tthe General Services Administration says that they appreciate RIM for their focus on security which is paramount within the government. Altimeter Group and Bloor Research compared 46 different security aspects of the largest four mobile operating systems earlier this year, Android, iOS, Windows Phone and Blackberry and found that Blackberry was the most secure mobile operating system. Additionally Blackberry did sell close to ten million devices in the first quarter of 2012, so they are still moving millions of devices per quarter. Blackberry has 78 million paying Blackberry users a large, secure global communication infrastructure and thousands of patents.
However all of these strong points are legacy and going forward RIM doesn’t have very much in its favor especially with such relentless competition and negative news. A sale of part or all of Blackberry is definitely possible, however a strategic merger or partnership is also a possibility and with the defiant stance RIM leadership has taken with regard to Blackberry’s future as a standalone company, this option may be more likely. Blackberry should focus on what they have always been good at, secure global communications. Blackberry exchange services and blackberry messenger as well other services and software could in the future be licensed out to other hardware makers, such as Samsung who might be looking for diversification from Android in their smartphone offerings. RIM could even license their Blackberry 10 operating system as well as their services much like Android does, going forward corporate and government security will continue to be paramount and RIM should double down on the current edge they have in security.
RIM should also look abroad to emerging markets and they could potentially work with a partner like Baidu on their forked Android mobile operating system called Yi; RIM could even team up with Facebook for the rumored Facebook smartphone. Facebook would get a hardware maker, ecosystem and a large patent portfolio and Blackberry could focus on security to maintain and grow their corporate and government customers while pushing the Facebook integration to a broader customer base. However this Facebook integration could back fire and alienate Blackberry’s traditional security conscious customer base. What is certain is that RIM is in dire need of a successful Hail Mary pass and even the Canadian finance minister Jim Flaherty stepped in to state that RIM would not get any government support from the Canadian government should they seek to restructure.
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