RIM and Controlled Flight Into Terrain

Research in Motion (RIM) is in a tough spot right now. Their latest financial results are, on their face, respectable. They saw increased revenue (up 24%) and their earnings of $1.27 beat both their own estimate ($1.20) and a consensus estimate ($1.19). Their installed base grew in the third quarter. These types of things, from a numbers perspective, generally look good. Normally, these numbers would be enough to keep shareholders and analysts happy. Of course, they don’t paint a complete picture. Unit sales during the third quarter were lower than expected. The profit numbers are down considerably from a year ago. RIM is indicating they expect even lower sales volume next quarter. They took a huge hit on their writedown for Playbook. The QNX-based Blackberry 10 operating system is now delayed until the end of 2012. The image of their infrastructure as sturdy and reliable has been tarnished by recent outages (one global).

The problem seems to be that RIM leadership, when viewed by an outsider, thinks that checking all of the boxes is good enough. Touch screen smartphone? Got that. App store? Yup. Tablet? Got one of those. Multi-core handsets? Right here. Modern mobile operating system? On its way. They act like Detroit car manufacturers in the 1980’s and 1990’s: as long as they have all the checkboxes of what they “think” people want ticked, then they are done and success should follow. They seem completely oblivious to some gaps and problems, and it isn’t about technology. I can just imagine their dismay when the Kindle Fire comes out and, with its current warts and blemishes, sells as many units in a week as Playbook has sold in 9 months. Apple releases an iPhone model that some view as a disappointment (because it didn’t meet the fevered dreams of some very vocal so-called “pundits”), and Apple can’t make them fast enough. They watch as Android takes top spot, iPhone takes over their once-thought-impervious enterprise stronghold, and iPad continues to be the benchmark for tablets.

Can RIM make a comeback? History is not a kind teacher here. Resurgence in technology is typically very rare. Apple managed it, but only after a pretty substantial makeover. IBM came back from the brink, but they are nowhere near as dominant as they were at their peak. But, in the mobile space, the news is not good. Palm (with the Treo) was once one of the top providers of mobile technology. Now they are an open-source afterthought inside HP, their recent resurgence due to firesale prices on a dead device. Windows Mobile was the king of the US smartphone once, but its Windows Phone 7 successor has yet to crack the 2% barrier, an also-ran that has yet to achieve the hype. Nokia owned the global smartphone market, holding as much as 60% of the market at their peak. Now, they have dwindled to the point of irrelevance, and have largely abandoned the system (Symbian) that got them there.

Overall, the technology landscape is littered with the remains of past players, once significant forces in their respective segments. Most were assimilated into something larger. DEC and Tandem were subsumed into Compaq, which is now part of HP. Apollo Computer was also swallowed up by HP. Silicon Graphics, once the standard for graphics computing, was bought by Rackable Systems (which changed their name to Silicon Graphics International). Sun Microsystems is now part of Oracle. 3COM, the originator of Ethernet and once one of the premier providers of network technology, is now part of HP. Gateway is gone, now part of Acer. Independent game PC makers Voodoo and Alienware are now part of bigger companies (HP and Dell respectively).

Needless to say, past history isn’t encouraging. RIM’s future is likely to be part of something bigger. But who? HP already blundered once with the Palm acquisition, and they apparently tried to find buyers before giving up and making it open source. IBM has made no noise about wanting into the mobile computing space beyond enabling technologies. Oracle has been the target of rumours, but nothing much has come of that. Samsung has put some effort into Bada, as well as continuing to be a major player in Android and Windows Phone. Nokia has made their bet with Windows Phone. HTC appears committed primarily to Android, but with some Windows Phone offerings.

Anyone buying RIM probably isn’t buying their overall business, they are buying their patent portfolio and maybe some of the technologies (primarily Blackberry Messenger) to build on. There’s no point in buying them to remove them as a competitor. That is going to happen without anyone else spending a dime. It won’t matter what technologically superiority any new Blackberry has relative to any of the Androids or iPhones that are available. Any new Blackberry is going to suffer from 3 fatal flaws: the damaged Blackberry brand, a lack of apps and a lack of content. Yes, there are many people who are happy with their Blackberries, and are satisfied with the apps and content available. But millions of people disagree, and they are voting with their wallets. Corporations have also voted, and Blackberry isn’t the winner here.

So, does RIM just chuck it all and pack it in? They could. It isn’t the most pleasant solution. It would mean selling the company to someone else, and live with those consequences. It would mean the end of RIM in its current form, and probably as an independent entity.

Before doing that, RIM might consider a radical makeover at the top of the org chart. This isn’t just about abandoning the co-CEO structure. This is about showing Balsillie and Lazaridis the door. They are out of touch, don’t know what consumers want, and are doing an admirable job of what pilots called “controlled flight into terrain”. Sure, they’re at the controls, and confident of their actions, but the plane is going to dig a hole in the dirt nevertheless. RIM needs someone who has a good grasp on what consumers want. Smartphones are no longer dominated by enterprise users, they are dominated by consumers. RIM needs leadership that understands the consumer, and the company needs to refocus on consumer sales. This isn’t primarily a technology problem, its a product problem, and they need a product person at the controls.

Part of the consumer focus could (and maybe should) include a re-evaluation of Blackberry 10, and whether it ultimately makes sense. I still think RIM would be better served by riding the Android wave, and by broadening the availability of BBM. Build on what they can do, scalable enterprise infrastructure (their latest issues not withstanding), but apply it to Android and iOS. Stop trying to fight the current and paddle along with it for a while. I’m sure RIM still has great ideas lurking in their labs, but they won’t matter if they never see the light of day or no one buys the products. RIM has smart, talented and imaginative people, but it’s time to put that effort into directions with a chance at success.

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