After The Talk, RIM Takes Action

RIM executives have spoken about the need to rebuild the company, and cut costs to make that feasible. Now, the talk has become reality. The layoffs that were announced have started to happen, with a facility in Halifax seeing 25% of their staff let go. Some “minor” assets are, will shortly be, up for sale, such as the NewBay cloud hosting provider. There is continued speculation about IBM’s interest in RIM’s network, and the rumour about a Samsung deal persists (despite it not making much sense for Samsung). That whispering has helped buoy RIM stock, and I expect that the stock will continue to see some support as layoffs and asset sales continue.

I would expect that support to be short-term though. While these are all necessary moves, everyone is still waiting for the real test: how does Blackberry 10 do in the market. As I’ve said before, I believe that BB10’s odds of success are extremely low. I would never say zero (never say never), but they are very close to that number.

The reality is that consumers and enterprises have spoken. They want Android and iOS. Smartphones now represent more than half of all mobile phones in the US. Recently, 2 out of every 3 mobile phones purchased were smartphones. Between the iPhone and Android phones, they own anywhere from 85% to 90% of the smartphone market in terms of new sales, depending on whose numbers you look at. The next two platforms, in terms of sales, are Blackberry (with somewhere between 3% and 7% of the market) and Windows Phone (perennially stuck around 2-5% since late 2010).

It isn’t just the unit sales that matter. Again, it comes back to ecosystem: iOS and Android each have one, BB10 won’t. Both iOS and Android have more than half a million apps in their respective app stores. Blackberry as a whole only has around 100,000, less than 1/5th of what either of Apple’s or Google’s stores have. BB10 won’t even start with as many apps as there are in the current Blackberry store, because current BB apps won’t run on Blackberry 10, and the only way to “port” them is to rewrite them.

Again, I know I’m repeating myself, but BB10 has a very steep, practically vertical slope to climb here. Its success or failure won’t just hinge on it being “better”, or that the devices are “better” or more powerful. Industrial design will carry a meaningful part of the load. If the new BB10 devices still look like something designed in the aughts, pre-iPhone, then that will be one more strike against them. Price won’t be as big a factor as some might think, either. They could be free, and they are still unlikely to attract a huge following. I certainly don’t expect the types of line-ups we see for new Apple product (but I do expect Blackberry proponents to position that as a “good thing” and as a “benefit” to BB customers). Blackberry 10 has to somehow convince consumers and business that it is superior in a meaningful way to convince people to abandon their current phones, and for iPhone users, their library of apps purchased at some cost. That is a very hard sell. Why would someone walk away from hundreds (or even thousands) of dollars in apps and other content for some intangible potential “improvement”?

RIM needs a fair bit of luck to pull off a hit with Blackberry 10. Me, I would bet more on a sale of some or all of the company before that even occurs. It may be the fastest way to get the shareholders something, and to preserve some jobs in Waterloo. I would not bet on Samsung buying them. The potential IBM deal makes some sense. Perhaps even something with HP, or from far-left field, Oracle. It is entirely possible that large parts of RIM (or even all of it) may be carved up and sold before BB10 even hits the streets, and that may be for the best in the long-term. And RIM employees, take heart: VC, angels and others with money are looking at the potential pool of talent in the K-W area as critical building blocks for a vibrant tech startup environment. RIM’s demise could be the seeds of a much larger and healthier tech environment for Waterloo and surrounding communities.