More Bad News At RIM

Things are looking dire over at RIM. Rumours put the expected layoffs at 40%, on the same day another senior executive decided to leave. Their most recent financial data indicates they will post a loss in Q1, which would be their first in quite some time. Their global marketshare slipped to 6.4% in the most recent quarter, and they not only lost share but this time also saw a drop in shipments. Apparently they are sitting on over $1 billion in unsold inventory. They have finally decided to secure the services of investment banks to explore next steps. These are not the ingredients of a company poised for resurgence.

Some Options: More of the Same, Sell The Company

So what’s left? There are a few options. One is to simply soldier on, hope for the best, and inevitably be placed into bankruptcy (governed in Canada by the Bankruptcy and Insolvency Act). So far, this has been the visible plan. They just keep going and going, vainly hoping that a “better” product will save them. They may not live long enough to see BBOS 10 come out, and that will be too little, too late. Their problem isn’t the tech specs. Their problem is the ecosystem, in that theirs isn’t as good.

Another option is to sell the company to someone bigger. I still think that HP might be a good fit, provided HP simply keeps their depth and talent in mobile security and enterprise integration, and drops the OS and hardware bits. BlackberryOS is effectively dead. No one wants it. Take the good parts (security, enterprise integration) and meld it with Android, and OS people actually want. The alternative would be for Google to buy them, again for the same reasons. The handset and operating system have no real value. The value is security and enterprise integration, which are the biggest reasons for Android’s tepid presence in enterprise right now.

Partner and Licensing: Not the OS, But…

Their last option, and the one they keep talking about, is “partnerships” and “licensing”, specifically their next-gen operating system. Again, who would want to? There is zero incentive for a big handset producer like Samsung or HTC to licence their next OS. Given the current product’s success, the next one doesn’t have an obvious future. Nokia might be interested, given the dull thud that has turned out to be Windows Phone sales. Despite the release of the Nokia devices that were going to “change everything”, the result was they did nothing. Windows Phone dropped from 2.6% to 2.2% of the global market. They did sell a few more units, year-over-year, but it didn’t make a difference.

Again, the argument that the next BB operating system will be “better” doesn’t matter. For one simple reason:

Consumers Don’t Buy Tech Specs

If they had, the iPod, with less storage, fewer features and a higher price, would never have completely owned the MP3 player market. BetaMax would have outsold VHS. Other operating systems would have outsold MS-DOS, Windows and Windows NT. The Motorola 68000 family of microprocessors would have outsold the Intel x86. Heck, the vinyl LP would still be the ruler for audio (if audiophiles are to be believed). There are plenty of “technologically superior” products that aren’t the leaders in their space, or never survived.

What matters is ecosystem: apps and content. Android and iOS have lots of it. The current Blackberry doesn’t, and the next one has less right now.

Their best value for licensing and partnerships would be their enterprise integration and infrastructure (BES, BIS, BBM) and their security skills. That’s what’s left, and it is a glaring hole in Android. Both iOS and OS X could benefit from RIM’s skill and technology in this area. RIM’s operating systems aren’t their real value. Their other technologies and skills are.

How Long Will They Last?

The next question, now, is how long will RIM last? They still have cash, but if they continue to lose money, that will disappear, possibly before the end of the calendar year, but more likely not until early next year. If their marketshare continues to decline at it’s current rate (which seems to be about 20-30% per quarter, year-over-year), they may slip into the “other platforms” categories on the marketshare pie charts within the next 4 quarters. I would guess that RIM has until the end of 2012 to make something happen. Even if, by some miracle, their next OS is a hit, I’m not sure they will survive long enough for it to grow and refloat the company.

I wasn’t expecting RIM to be in a loss position until sometime late this year, or early next, but that was a gut-feel thing. I was expecting that they would be able to sell enough to at least break-even. I guess things were worse than I had anticipated, and now things are dire. Even cutting back on staff isn’t a permanent solution, and that eats into their cash (to pay out the severance packages). Yes, it reduces costs, and staff is typically one of the biggest expenses for a company. But they are also the people who have the ideas, and make the products happen.

Given where they are, RIM’s best shot at a deal in the short-term or medium-term is a sale. It will be a sad event, but I’m not sure a licensing deal can happen in a useful timeframe, if it can happen at all. Selling to someone, and I think Google or HP might make the most sense, may be their best option.

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