Amherst Bytes: The End of the Blackberry Era

RIM is stuck. The Canadian manufacturer of BlackBerry products released its second fiscal quarter results last Thursday and the numbers fell below even the most pessimistic estimates: gross margin sank from 44 to 38.7 percent, the firm had shipped 10.6 million phones instead of the 11 or 12 million expected and sold a mere 200,000 units of its new PlayBook tablet computer. One bad quarter is not the end of a company, but within the context of RIM’s recent struggles it begins to sound like a death knell.

As far as sales numbers go, the problem for RIM isn’t just that it cannot sell its products; it’s that it cannot sell its products in both the markets it used to dominate and those it wants to dominate in the future. Since the advent of the iPhone, RIM’s life support has been its monopoly on corporate accounts. Rather than go toe-to-toe with Cupertino in the “simple enough for everyone” design game, the Canadians stuck to their strengths. Secure corporate email and BlackBerry Messenger (BBM) enabled them to stay afloat even as iPhone market share grew quarter after quarter.

But now that companies are realizing how much can be saved by letting employees use their own smartphones for work, iPhone and Android handsets are pushing BlackBerry out at an alarming rate.
You know the market landscape has changed when HTC is trying toconvince analysts that younger consumers won’t want an iPhone because all of their parents use one for work.

Then there’s the tablet market. RIM’s loss here isn’t a unique one; HP just took a huge hit on its TouchPad device and liquidated their stockpiles at $99 a pop. The Playbook’s projected sales stood at 500,000. Instead, the real tally was less than half that.

While Apple sold over nine million iPads, RIM managed a modest 200,000 tablet sales. It’s an apples to oranges comparison since Apple leads the market by a wide margin, but RIM can only hang in so long with numbers like that before it too has to retreat from the market with a fire sale. It’s these two backstories — the corporate accounts and the tablet game — that persuaded investors to drop RIM’s stock a whopping 19 percent in late trading last Thursday.

And those are just sales in the present. Going into its last release cycle, RIM was already behind. Google and Apple were churning out software updates with Froyo and iOS 4, and new hardware with the iPhone 4 and the multitude of Android handsets. RIM spat out the Torch and OS 7, neither of which received stellar reviews. Sluggish growth in the rapid, seasonal game of tech toys is no growth at all and RIM hasn’t shown the world any sign of change. We’re waiting to see Apple’s iOS 5, iPhone 5 and iCloud. We’re waiting to see Google’s Ice Cream update and what happens with its recent purchase of Motorola.

All RIM has in the works is a new QNX-based version of its mobile OS that premiered on the PlayBook and is slated to come to the BlackBerry this fall. With the exception of that announcement, the only news to come out of their Ontario offices has been these earnings reports and the layoff of 2,000 employees (11% of their workforce) this summer.

Even RIM’s employees have begun to make noise. Anonymous memos from alleged employees have found their way onto the web, bemoaning a lack of confidence and passion along with a serious need for a restructuring of the company’s leadership. Despite all of their projects lagging behind schedule and retailer requests rather than customers’ demand determining product design, the most famous of the letters carries a hope that RIM can still restructure and reform. All three of the memos that have been published are written as hopeful pleas for change to the Co-CEOs of RIM, Jim Balsillie and Mike Lazaridis.

RIM is still a profitable company. It just doesn’t have the roadmap or the depth that will enable it to compete with the giants. Many corporate accounts will hold on to their secure email servers, some BlackBerry addicts won’t let go and the PlayBook will still sell to those consumers who will buy any tablet so long as it isn’t an iPad. Gizmodo’s Brian Barrett has even suggested that new management and a flawless release of the QNX-based BlackBerry OS would give RIM a chance to avoid being sold.

But RIM’s executives have remained silent and a perfect product release is a tall order. Without a corporate comeback, without innovation, without excitement or passion or even internal confidence, the Canadians are in trouble. Microsoft or Dell purchasing the company seems far more probable. In 2009, Fortune Magazine named RIM the fastest growing company in the world. Two years later, it looks to be on its last legs. Rest in Peace, Research in Motion.