RIM starts 2012 like it left 2010 – behind and waiting
Research In Motion’s fortunes are expected to get worse before they improve as the company enters 2012 the way it exited 2010 — awaiting a new operating system for its devices that the company is banking on to revive sales.
It looks like it needs it — bad news followed RIM even on the last business day of the year, as it was revealed the BlackBerry smartphone lost further U.S. market share to Apple Inc. and leader Samsung Electronics Co.
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RIM’s share of U.S. mobile-phone subscribers in the three months through November fell to 6.5 percent from 7.1 percent in the previous quarter, research firm ComScore Inc. said. Samsung increased its share to 25.6 percent from 25.3 percent. Apple rose to 11.2 percent from 9.8 percent, according to ComScore.
The OS, based on architecture created by QNX Software, an Ottawa company RIM bought in 2010, already powers RIM’s PlayBook tablet. But its use in a new line of BlackBerry smartphones has been delayed until the end of 2012 amid rumours RIM is struggling to make email work on the OS.
RIM denies the claim, insisting the delay relates to the availability of processing chips that can maintain battery life in the power consuming QNX. It has also said that dedicated email will be available on the PlayBook in February following a software upgrade.
But Brigantine Advisors analyst Kevin Dede said the company could also be facing technical challenges in modifying the highly secure QNX system to accommodate email on an open platform.
The QNX delay leaves RIM with an interim OS that is being marketed heavily in the U.S., but analysts see a new products vacuum that will dictate at least three more quarter s of declining sales.
The first part of 2012 is “really scary,” said JMP Securities’ Alex Gauna. He said RIM’s strong cash flow and continued profitability have bought the company time, arguing that management still believes it can innovate its way to success.
But he told Bloomberg Television that even a buoyant QNX launch may not stem the RIM decline, suggesting the company may become open to a merger, acquisition or breakup if it profits turn to losses next year or in 2013.
He said trademark lawsuits, while probably not material to RIM’s financial performance, amount to the latest in series of gaffes that include senior management’s failure to address a global BlackBerry outage in October until the crisis had stretched past three days.
He called them another sure sign that the company is not getting it.
The suggestion that RIM is in defiant denial has gained credence, especially since co-CEO Mike Lazaridis in April abruptly halted an interview with the BBC after being probed about the PlayBook and about national security concerns related to BlackBerry messaging.
The questions were hardly surprising given the anticipation around the PlayBook’s debut and amid threats from the UAE and India to clamp down if security officials were denied access to encrypted BlackBerry emails and texts.
India in particular was worried after the devices were reportedly used to help co-ordinate the 2008 terrorist attacks in Mumbai. Still, Lazaridis was definitely annoyed.
“The interview is over,” the RIM co-founder said.
“It’s just not fair. This is a national security issue. Turn that off,” he said gesturing toward the camera.
A few days later, the usually composed Lazaridis delivered another overheated message, this time in an interview with The New York Times.
The paper had just published a review that mocked the PlayBook for its lack of consumer apps versus Apple’s market-leading iPad, released more than a year earlier, and for the absence of email that doesn’t require a tether to a BlackBerry phone.
“Why it is that people don’t appreciate our profits? “ Lazaridis said.
“Why is it that people don’t appreciate our growth? Why is it that people don’t appreciate the fact that we spent the last four years going global? I don’t fully understand why there’s this negative sentiment, and I just don’t have the time to battle it. Because in the end, what I’ve learned is you’ve just got to prove it over and over and over.”
RIM has moved aggressively in recent months to respond to its critics, making vice-president level management changes, boosting spending to develop more third-part apps for BlackBerrys and opening its extensive global network to the prospect of cross-licensing deals with rival device makers.
The meltdowns in retrospect may be signs of the pressure to keep up the lightening in bottle success that had characterized RIM since it was established in 1984 by Lazaridis, then an engineering student at the University of Waterloo, and University of Windsor engineering student Douglas Fregin.
They might also relate to the pressure on the poor-selling PlayBook, which some analysts say is at the symbolic heart of RIM’s problems, though declines in its mainstay phone handset business have fueled the sales and profit slump.
But many see the Lazaridis outbursts and the mishandled PlayBook debut as evidence of a bigger problem, a lack of a connection between RIM and the demands of consumers.
The tethering issue in particular has been seized on by bloggers, who slam RIM for releasing a device that, while offering enterprise-grade hardware, fails deliver the consumer-focused apps that have driven sales of the iPad and, more recently, the Amazon Kindle Fire.
“In 2011 we expect certain things out of a tablet, and the PlayBook just doesn’t have them out of the gate,” said Simon Wong in a message posted on a blog site around the time of the NYT interview.
“They are arrogant in thinking that a BB-centric tablet will succeed based on the BB name alone. They are disconnected from users because they don’t really understand or appreciate the end-users needs.”