RIM And The Future

There were a couple of items in the Global and Mail today regarding RIM. The first was an attempt to explore different options to “rescue” RIM. The second covered key items from RIM’s Annual Information Form. These two pieces together really do paint a dire but accurate picture of just how bad things have become for the Waterloo icon. But what is equally interesting is to go back and look at RIM’s 2011 Annual Information Form, and compare what it said then, vs. what the new one says now. That, in the context of the 5 main points in the “Rescue” article can really only lead to one conclusion: things are not good, and RIM only now has figured it out.

Heads In The Sand

What is striking, when the 2011 AIF is compared to the 2012 AIF, is how the focus has shifted. The 2011 document was written by a company clearly out of touch with reality. Their first major “risk”? Their ability to protect their IP. Are you kidding me? It was clear back in 2010 that the smartphone landscape had shifted dramatically. But to put competitive pressure and innovative pressure far down the list in 2011 is unfathomable. It took them a full year, and 3-years too late, to realize that they were in trouble. To read the 2011 form, it would appear that RIM owned the smartphone market. Talk about a “vibrant 3rd party developer community”, the advantages of their tablet technology and an almost dismissive tone on competition, shows a group living in some kind of dream world.

The 2012 document is far more harsh. The risks around protecting IP are pretty much gone. Instead is a focus on the problems of competition, lost marketshare, damaged brand and questions about the future of their upcoming product. This is a tone that needed to adopted back in 2010. By then it was already clear that RIM’s trajectory was down. But rather than owning up to this, RIM carried on as if nothing was wrong, and that nothing had changed. Instead of acting at a time where the course of the company could potentially have been corrected (and they had the money to fund changes), now they see rocks a short distance from the hull with little time to get out of trouble.

So What Can Happen?

The “Rescue” article outlines 5 different things that RIM can do, but few of them seem like much of a “rescue”. Selling the company, moving into a niche position, finding a partner or staying the course aren’t a “rescue”. Selling the company effectively means defeat: the buyer will subsume the parts of the company they want to keep, selling or shutting down the rest. It means most of the Waterloo staff will either move or be let go. At some point the Waterloo facilities could be shut down entirely. Either way, it means the end of RIM as it is. Sure, a handful of key people get to keep their jobs, but it doesn’t sound like much of a “rescue”.

How does the author believe a “niche player” approach is a solution? This isn’t the automotive market, where there are plenty of niches and people with money to live in them. RIM won’t be able to make enough money off of the devices to pay for the infrastructure. For RIM’s key technologies to work, it requires scale, and that means money. This isn’t selling $500,000 sports cars and only making about 100 per year. There simply isn’t going to be the volume available to make a go of it. Just ask Palm how well that worked for them.

The whole partnership concept presumes anyone wants to partner with a dying brand and marginalized technology. Why would someone like Samsung want to make handsets that sell in diminished quantities over time? What is the upside for them? There is already minimal margin on these devices for most manufacturers (Apple being the lone exception). Sure, it means more volume for a little while. But it also means manufacturing capacity that is consumed that could be building higher-volume product. To partner means to largely give up on the brand. It isn’t a “Blackberry”, it’s a Blackberry-compatible Samsung Galaxy Something. RIM gets a few pennies for their trouble, but it doesn’t fix the problem that fewer people want the product. Microsoft has partnered with one of the best-known brands in the mobile space (Nokia), and it hasn’t helped them to gain any new market share. Why would anyone believe it would be different with RIM?

Obviously staying the course is a controlled flight into terrain. This isn’t a “rescue” (and I’m not sure how you can position it as such). Yes, it’s an option the company can take. But the article is about rescuing the company, not watching it dig a smoking hole in the technology landscape.

The only semi-rescue is the idea of breaking the company up. Quite frankly, I’m not sure there is all that much value in the handset-side of the business. There are already better and more viable operating systems out there. I would expect there to be some value in some of the patents (some because there could be cool ideas in the inventory, but also for defensive purposes). But the services-side of the business is more attractive. BBM could be a great multi-platform communications tool. Parts of BIS and BES could help to bolster cloud-based and enterprise integration for mobile devices. It would be a far smaller business to be sure, but it could potentially weave its way into the underlying fabric for mobile computing. I could see this becoming attractive to someone like Amazon to bolster the Kindle Fire. I could see IBM or HP getting interested to have it as part of the enterprise software and services offerings. Those options would stand a better chance of keeping something in Waterloo, I would think, that trying to sell the whole thing off kit-and-kaboodle.

No Clear Path

There really isn’t a clear path ahead for RIM. The only thing I expect isn’t an option is “more of the same”, pinning hopes on an operating system that is no longer relevant and no one cares about. Whatever the future of RIM is, it isn’t the RIM we know today.