RIM’s Hail Mary is Only a Year Late

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Research in Motion (NASDAQ: BBRY) has announced that it will be releasing its much anticipated new wave of devices with the new operating system, BBOS 10, on Jan. 30, 2013. The new platform has already been awarded the FIPS 140-2 certification ahead of the release, an achievement which RIM has not accomplished before, which means that the new phones and the OS can be deployed by government agencies immediately after the release.

Like Nokia (NYSE: NOK) with the very well-received Lumia 920, the struggling RIM has got everything riding on its new smartphones.   In recent days CEO Thorsten Heins has refused to admit publicly that the company is in trouble or that the industry has moved on from what the company is selling--or in the case of its plummeting market-share, not selling.

The global smartphone market has been completely dominated by Apple (NASDAQ: AAPL) and Samsung, with the two companies controlling more than 45% of the market. Even in regions that have been ignored by Apple, such as China, the top spot is held by Samsung, followed by Lenovo, whose recently-launched smartphones have witnessed explosive growth. On top of that we have other Chinese players such as Huawei and ZTE cannibalizing the high and mid-end of the market previously dominated by HTC and Motorola.  

Similarly, Google (NASDAQ: GOOG) is also aiming for a slice of this pie through Nexus 4, and Microsoft is also believed to be working on a new smartphone design, which is a natural progression following the release of the Surface tablet. Competition in this industry is severe, and the question is if Blackberry 10 devices can staunch the bleeding and stabilize sales.  RIM's market share collapse is well-known, as is the fact that RiM has made mistake after mistake – the Playbook  and BBOS 10 being more than a year late – and yet there is still this odd kind of hope associated with this company.

The 3rd quarter sales report from IDC revealed that Sony was able to capitalize on the lack of new devices from Nokia and RIM with the latest Xperia Android phone, but that situation will not last.   Nokia’s sales dropped off as the market waited for Windows Phone 8 and the new Lumias, while RIiM has been bleeding market share all year. 

The issue going forward in this industry is not simply about the device itself. Features and style are important, but the support behind it and its ability to bring real productivity gains to people’s lives is what will sell devices.  For the dominant players, iOS and Android, the value proposition is in the totality of services and app platform they offer. 

Microsoft, with all of its resources and cash, is struggling to build their ecosystem with Windows Phone and its merger with desktop Windows.  Despite how much sense Microsoft’s plan makes, it still has not passed the consumer adoption test.  Nokia Lumia sales have been great, and Windows 8 licenses are selling faster than Windows 7, but there are mixed reviews and conflicting reports of tablet and laptop sales.

In the very near future the phone and tablet will be our computer.  Microsoft, Apple, and Google understand this.  Nokia’s 920 has pushed the secondary functions of a smartphone – camera and GPS – forward and has the underlying technology and research department to continue competing, and their situation is still dire even with Microsoft’s money behind them.

The bounce in RIM is a bounce to alleviate short interest--nothing more.  We saw the same thing in Nokia ahead of Nokia World in August/September.  Throw in the recent patent ruling against RiM and in favor of Nokia, and the future looks even bleaker.  If there is anything positive that comes out of RiM and BBOS 10, it won’t happen before the end of Q1 2013.  Taking a position in RIM now would be a speculation based on hope rather than logic.  Waiting until after the bounce has been retraced would provide a better entry point.

PeterPham8 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and 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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