Research In Motion: Holding on for One Last Time
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It seems Research In Motion (NASDAQ: BBRY) is on its way to become a bit-part player in the smartphone game. The latest earnings report is nothing that we didn’t expect and the company’s performance is just getting worse every quarter. Fool analyst Evan Niu gave us a brief snapshot of the company’s earnings and told us why RIM looks like a value trap. But what struck me the most was the roadmap that CEO Thorsten Heins has laid out for the embattled smartphone maker.
Now I will analyze a few aspects of his comments regarding the company’s future and tell you what leads me to think that RIM might become a small time player in this big game.
“The competitive environment has become increasingly challenging…BlackBerry 10 product and platform will address this later this year.”
I will make this point clearer to you since it seems Mr. Heins missed something over here. The environment is not just getting challenging for the company; the environment has already eaten up RIM’s market share tremendously. And this is old news. Take a look at what has happened to RIM's market share over the last two years with the advent of Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG).
Source: comScore
Thus we see that the competition isn't just getting increasingly challenging for RIM, it has already eaten up the company. And I won't count on BlackBerry 10 to arrest RIM's slide. Let me tell you why.
The BlackBerry 10 is expected to be launched sometime in the fall of this year, which means it’s on a collision course with the highly anticipated iPhone 5. This single reason might make the upcoming phones a failure but I will add a few more.
Firstly, RIM has been playing with this new platform for quite some time and we saw a glimpse of it in the largely unsuccessful Playbook. So, one can say that the platform has failed its first test. Moreover, by the time the release date comes, Google would have rolled out the latest Android version, i.e. the Ice Cream Sandwich, and Apple’s iPhone would have added another generation of rich user experience to its arsenal, precisely the areas where RIM is lacking.
“We believe that BlackBerry cannot succeed if we try to be everybody's darling and all things to all people… we will seek strong partnerships to deliver those consumer features and content that are not central to the BlackBerry valuable position, for example, media consumption applications.”
The primary reason RIM’s once loyal customer base moved away from it was because they found its phones dour and boring. RIM needs to realize that enterprise customers and professionals don’t use phones just for messaging and emailing nowadays. Content delivery and user experience provided by the platform’s ecosystem play an important role in defining a smartphone’s value proposition. By saying that consumer features aren’t central to brand BlackBerry, I believe Mr. Heins is committing another fundamental mistake over here that might cost RIM dear. This regressive mentality won’t do RIM any favors.
One should applaud the CEO’s candid opinions and pat him on the back for not window-dressing the company’s state of affairs. But his rescue plan seems like a hastily patched-up one (what else can you do in 10 weeks). I did find a few chinks in it and I have outlined two of them above. The only way out for RIM at the moment is the success of the BlackBerry 10 but I have told you why even that may not be a savior.
Final thoughts
Research In Motion’s days as a top-notch smartphone maker are coming to an end. The failure of BlackBerry 10 might deal a fatal blow to the company's prospects. And once this last-ditch effort to save RIM turns out to be a blank fire, the company might be put up for sale.
RIM’s investors must have had a good weekend as the shares spiked 7% after Mr. Heins left the possibility of a sale open. However, even that might not be an easy task. Firstly, I don’t think many will be ready to risk their own lives by trying to save a sinking ship. Also, the company’s present $7.6 billion market capitalization will be another hindrance. In addition, the Canadian government will probably put up barriers for RIM’s suitors as it needs them to display how the acquisition will benefit Canada.
But the possibility of scuttling the sinking ship that RIM is and selling its parts remains open. That would surely be a painful end to a once-mighty company who gave us the once-famous BlackBerry smartphone.
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