Tag
Blackberry

RIM Circling the Drain?

Research in Motion over the past decade has become a household name with their iconic product, the Blackberry. The company essentially created the first mass market smart phone. They have 19 billion units out there. However, this past darling of the market is now facing trouble, possibly destruction. RIM made several missteps creating their first revenue shortfall in nine years. The first of which was that their last few models of smart phones were less than impressive. RIM’s Playbook tablet was dead on release and a complete waste of money and talent. Finally, the death blow may come from an impending law suit from Dutch chip maker NXP Semiconductor.

From a business perspective, accessibility to information is key for a smart phone. This is both about quickly getting the information and displaying it. That translates to processing power and screen size. For this we should compare the Blackberry Torch to the iPhone 4. The iPhone screen has the Blackberry beat by .3 inches and nearly double the resolution. And in processing power the Torch CPU has a speed of 624 MHz while the iPhone pulls ahead again with 1 GHz (1000 MHz). Apple also has the advantage compared to the Blackberry in terms of multi-use. The sheer number applications for iPhone makes it seem like the land of milk and honey compared to Blackberry’s desolate wasteland. Blackberry does have an advantage. It has the greater business prestige. Apple products have a more niche appeal and sometimes have the connotation of being a shiny toy. But that all went away when they tried to enter the tablet arena against the iPad.

RIM’s Playbook is something I’ve only read about. That’s not a good sign. I’ve never held a Playbook or even seen one. According the Canadian Research and Development Intelligence, RIM spent 1.4 billion dollars in R&D in 2010. And with that, they came up with the Playbook. It was originally priced at 499 dollars, matching the price of Apple’s iPad 2. Like the Torch against the iPhone, the Playbook was less powerful, smaller and had weaker a battery life against its opponents. Sales didn’t pick up until RIM decided lowering the price to $199. RIM has cited weak Playbook sales as the reason for the fiscal troubles. If that’s true, then they have only themselves to blame. They rolled out an inferior product to their competitors and priced it the same. That initial mistake soured the market for the Playbook. There is one silver lining: Playbook is doing well in India, but that will not be enough. RIM’s problems don’t stop there. The threats are not only internal.

On top of all their other issues, Dutch chip maker NXP Semiconductor is suing RIM over six patent infringements. Should they win the case, they will add to the already 125 million dollar quarterly loss for RIM. It might be a death blow to the smart phone company. It’s difficult to shake bad press, especially when sales are down. The two CEOs of RIM have even vowed to take salaries of one dollar a year until the company is back in good financial straits. That can be taken as a sign that company leadership will do what it takes to solve their major problems, but that also proclaims that there are major problems to be solves. The press is filled with CEOs paying themselves massive bonuses while their companies post record losses. What does that say about RIM when their CEOs won’t even take a paycheck?

Research in Motion is in trouble, but they’re not dead. There are things the company can do to remedy or at least mitigate the situation. One idea is that they shelve the Blackberry OS and switch to the less costly Android. It would allow them access to Android’s stable market. The down side is that it would put them in contest with larger phone manufactures like Samsung and HTC. However, retooling themselves for a broader, lower end market, maybe what they need. They could go the Nokia route and partner with someone, anyone who can bring in a fresh infusion of capital and new ideas. A third and less appealing option would be to die gracefully: Sell what’s left, lease out patents, and ensure that their talent secure jobs elsewhere before fading away. It doesn’t matter what they do, as long as they do something. Staying the course will only bring a chaotic and spasmodic end.

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