Is RIM Another Sun Microsystems In The Making?

An article today on the Globe and Mail got me thinking about some trends I’ve been seeing with RIM. The article outlines a growing sentiment that RIM needs a leadership change, but notes that asking the current leadership (specifically Mike Lazaridis and Jim Balsillie) to step down could be hard, given that Lazaridis founded the company, and Balsillie is effectively a founder. In the mean time, RIM’s marketshare is shrinking, the ability to influence the mobile market waning and there are suggestions that Microsoft should buy RIM.

So, we have a company with shrinking market share, declining share prices, marginalization in terms of influence and a desire by some to sell to a bigger company. Sound familiar? The only thing missing are shrinking revenues and money-losing quarters. Otherwise, this is the same trajectory that Sun Microsystems followed on its way to being bought by Oracle. This also matches up with Palm’s eventual swallowing by HP, but that wasn’t quite as earthshattering, in my mind, as Sun.

At one point, Sun Microsystems was one of the leaders in the server market, and they split the lion’s share with HP (at their peak, Sun and HP each had around 40-45% of the UNIX server market, with IBM, Silicon Graphics and others splitting the remaining 10-20%). Sun was the king of the UNIX desktop, and squandered billions trying to replace the Wintel PC as the business desktop of choice. However, as the market moved, and companies were more interested in something like Linux on commodity Intel hardware, Sun got caught, and it’s share declined. The company held on to Scott McNealy for far longer than they probably should have, but he was one of the founders, so removing him didn’t look good. Basically, Sun’s fate was largely determined by the time that too-little-too-late changes at the top happened, and strategic directions became muddled and reactionary. Eventually, the inevitable occurred: Sun was purchased by Oracle, and effectively ceased to exist as a company. They had already stopped being any kind of influence on the UNIX/Linux server market 3 or 4 years before the ultimate demise, their marketshare was paltry to say the least, and had been eclipsed by IBM, HP and Dell.

RIM appears to be a company on the same course: a reluctance to dump the founders in favour of trying to find new blood. The challenge, though, is finding someone that can do a better, or at least different, job. Anyone who comes in with a radical vision, even one that would be successful over time, will scare the investors even more than the current hands at the tiller. Radical change also means a severe cultural shakeup, and that means the company has to be willing to lose some of their key talent, and replace them with new people. A new leader that simply puts forward a “sort-of stay the course” won’t be enough, because that plan might inject new life briefly, but is unlikely to make a difference over the long haul. It might keep the various graphs from going down, and level them out, but it won’t make their slice of the pie chart bigger.

Would a sale to Microsoft make sense? I’m not sure that it does, simply because I don’t believe that Microsoft will be able to use 2 other mobile operating systems, and I don’t see them replacing Windows Phone 7 with QNX, no matter how superior it might be. I’m also not sure that Microsoft would care about the hardware business, since that would put them in direct competition with their licensees and partners. A company like HTC or Samsung might make more sense, it it would simply expand their existing portfolios. If HP hadn’t already picked up Palm, they might make sense. IBM could be a longshot, although they have been sticking mainly to the datacenter, having left the desktop with the sale of their PC and laptop business to Lenovo. Dell might be a possibility, but they have stuck mainly to hardware and haven’t made any serious forays into their own software.

I don’t expect much to change at RIM for the next year or so, simply because some of the big numbers, specifically profit and revenue, are still pretty good, despite the losses in marketshare. RIM continues to sell more units month-over-month, but that’s primarily because of the “rising tide lifts all boats” effect of a nascent market for smartphones. At some point that will level off, and RIM will start to see a decrease in the number of units sold over time. Until that happens, don’t expect much to change at the top of RIM’s org chart.