The Slow Death Of RIM

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

Apple and Google (NASDAQ: GOOG) have thus far dominated the smart phone market. Although Google didn’t really enter the hardware market with smart phone until very recently, both companies are the major winners in the smart phone wars, with Samsung being a third important player in the grand scheme of things. The Cupertino-based Apple has an excellent product that stitches together hardware and software perfectly. Google’s Android OS is open source, which leaves it to the mercy of the company that chooses to run it on their smart phone model, therefore providing a lot of different experiences for consumers who have bought different types of smart phones. There is a major difference between the SIII and the entry-level Android smart phone – the kind of irregularities that don’t do much good for consumer perception.

Thus far, however, consumers have been perfectly happy with the kind of choice that is available within this fairly closed environment. It is only when you start making money that someone else decides to come along and join the party. Often times, it is too late for the new entrant into the market to do make any significant inroads. Ironically, the two players who are trying to break into the smart phone market are names that were household ones at one point in time when it came to phones.

The Blackberry, released by Research in Motion (NASDAQ: BBRY), was once the pinnacle of smart phone computing. There was a point when everybody owned one; not just the business executives who it was originally intended for, but also teenagers who took to the BBM service by the truckload. If you’ve been following the company you’ll know that the much hyped Blackberry 10 is scheduled for launch on Jan. 30. The Canadian company will release two models – one with a keypad and the other a fully touch phone to run the primarily touch centric OS. This OS release has been delayed for nearly a year, leaving a lot of people wary about the company and its ability to deliver into timelines. After many changes to the launch date, it appears that the company will finally be able to deliver. But I fear for RIM.

There is nothing revolutionary is expected out of the Blackberry 10 update. Most of the features that are being spoken about are things like a Blackberry Hub, which will provide a single portal for messaging, mails, BBM and social networking updates, a camera application, a “user friendly” camera app, and predictive word texting. These are things most smart phone consumers expect nowadays. Like I said, there is nothing truly innovative about the upcoming release. The BBM service, which was once a great reason to pick up the Blackberry, is no longer the only alternative available. The only segment of the market for whom the Blackberry would appeal to would be the suits: the people who walk into board meetings, for whom getting away from workplace mail is not an option. These people are generally quite happy with the kind of service that they receive from the RIM phone, but even then I don’t see most of them running back to the Blackberry, unless they have been waiting all this while for the BB 10 update.

The other threat which could effectively wipe out RIM's little target audience comes from the Nokia (NYSE: NOK) smart phone. The Lumia 920, which is the Finnish company’s flagship phone, is a beauty not just in terms of looks, but also in terms of performance. It has been powered by Windows 8, which does face certain problems, but is over all a well rounded OS. Like the Blackberry, however, there is nothing particularly revolutionary that one can expect with the Lumia series. It looks good, and therefore may attract a large number of consumers who are swayed by that kind of thing – and let’s be fair, there are quite a few people like that. The phone is also backed by Nokia, which is a fairly well known brand, adding to the argument for people who value aesthetics over performance.

Not that performance is bad for the phone either. Like I said, one of the threats to the Blackberry’s corporate segment could come from Nokia. Since the OS is Windows 8, it makes available Microsoft Office applications such as Excel and Word, which are fairly easy to use. The SkyDrive integration allows you to save work from your smart phone and continue where you left off on your laptop – which would be a feature that appeals to anyone who uses their phone for work. The only drawback with the Nokia phone is the fact that it doesn’t have apps! Recently Windows Phone users complained that they couldn’t even access Google Maps on their browser. This could be Google just pulling an Apple on Windows and Nokia in the hope that it’ll deter consumers from purchasing Windows Phones. Whatever it may be, it is a fairly big drawback for the Lumia.

The apps conundrum is something Blackberry will have to tackle as well. Native Blackberry apps will not work on the BB 10, which will allegedly leave Blackberry users with something like 70,000 apps to choose from. I am not at all optimistic about the prospects for Research in Motion. How are you going to attract the teenage audience if you don’t let them take Instagram pictures of themselves in front of a mirror? Having said that, the Lumia doesn’t have Instagram either, but seems to be doing okay. Like I mentioned earlier, the only narrow segment of the market to whom the Blackberry might still appeal to could already be frustrated thanks to the delay in the release of the update.

I would advise you to look at shorting Research in Motion's stock. Momentum is currently good and the stock is going up. However, I truly believe that it will all come crashing down once the actual product is released. Definitely do not go long with Research in Motion. A snowball has a better chance in hell, and I’m ready to eat my words if I’m wrong.


keshavr has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google. 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!

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