How the Blackberry Got Juiced
Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It almost seems unfair to put into circulation one more opinion calling for the end of Research In Motion Limited (NASDAQ: BBRY) and its once-revered Blackberry line of products. While the sentiment is shared, rather than extolling Apple Inc.’s (NASDAQ: AAPL) iPhone once more or meandering through how Google Inc.’s (NASDAQ: GOOG) Android took over the market, an examination of the critical flaw that brought RIMM to this point would be of greater interest and value. The aim of this investigation is to identify those mistakes that doomed the Blackberry to a life of obsolescence so that one knows what to look for in the products of those competitors that now dominate the market.
The First Mistake
As is so often the case with industry-leading companies, RIMM seemed to completely miss the disruptive force that ultimately led to its fall from the top spot. After attempts by Palm to make the Personal Digital Assistant (PDA) the next big thing in technology – and, remember Apple tried to play in this sandbox with the Newton – RIMM was the first company to successfully design and market the smartphone. The Blackberry was a true revolution in communications and business, making it a must-have device for most professionals. Early Blackberries integrated phone functionality, PDA capabilities and enterprise security such that many companies provided the devices for their employees. In fact, the Blackberry was such a “need” that it was affectionately nicknamed the “Crackberry.”
When Apple unveiled the iPhone, most business people thought of it as a cute toy, but not a serious threat to the electronic briefcase that the Blackberry represented. After all, the iPhone was not slick at navigating enterprise e-mail servers and security questions abounded. Individuals that wanted to carry an iPhone, often carried a Blackberry for work as well. Where things began to go wrong for Blackberry was when people began to notice that there were important things the iPhone could do that the Blackberry could not. Rather than finding a means to make iPhone functionality available in some form on a Blackberry, RIMM either chose to rest on its laurels or was unable to create the technology needed.
By the time models like the Blackberry Storm were introduced – this model was finally able to provide some web access, retrieve stock quotes in less than 20 seconds per ticker and a few other critical updates – the tide had passed its tipping point. RIMM chose to underestimate its competition and did not respond quickly enough. If a Blackberry option had remained even close in functionality to the iPhone, RIMM would have retained a huge contingent of its customers.
The Road Back
As RIMM struggles to release the new Blackberry 10, one cannot help but think that the company is still playing a game of catch-up that it has already lost. Never mind that the Blackberry 10 has already been subject to delays, there is no indication thus far that it will be anything more than a new version of the old that does what older versions should have been able to do when they were released. As we learned in the recent patent verdict, there is already an iPhone copy in the likes of Samsung. Making a mildly altered version of the iPhone is not going to bring RIMM back from the brink.
Along these lines, the upcoming release of Windows Phone 8, a collaboration between Microsoft Corp. (NASDAQ: MSFT) and Nokia Inc. (NYSE: NOK), should give investors a clear glimpse of how the market feels about different breeds of devices. The legal setback for Samsung and Android may provide an opening for the Windows Phone, but unless it contains some actual innovation, its future may be short-lived. If the phone is not sufficiently innovative and exciting, not matter how well it works, it may never be given a chance.
Were RIMM to have a way to get back in the game, and its seems nearly implausible that this is a serious option, it would be by introducing a smartphone that gives the consumer something he or she had not previously considered but wants to try. RIMM must play the game that Apple played when it unseated RIMM from the top spot several years ago. It must be the disruptor, the exciting upstart, the audible gasp creator. If the company cannot manage this, it will never be more than a fringe player that is preferred by the idiosyncratic few.
A RIMM Position?
Were the stock to trade below $5, it might make an interesting speculative play as a turnaround or buyout story. Trading around $7, the stock has too much downside to risk holding it as more than a scalping tool. If news of the Blackberry 10 improves, it may become interesting again, but for now, RIMM remains another tale of the company that once ruled the world. It is a cautionary tale of stagnation that applies to Apple and Google today; should either of these behemoths begin to ignore disruptive technologies in their respective wheelhouses, it may be time to get out.
Mr. Ehrman has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Nokia. 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.If you have questions about this post or the Fool’s blog network, click here for information.