Is RIM fighting a losing battle?

The latest news from the BlackBerry maker may have been better than expected but Research In Motion's future is still far from secure.

In a sign of how bizarre the mobile phone business has become, the market was cheered that BlackBerry phone maker Research In Motion’s latest results were not as bad as expected. But, make no mistake, they were still bad.

RIM’s revenue was down 32 per cent from a year ago. It was largely unchanged from the previous quarter. The good news was that it’s subscriber base increased slightly to 80 million but to do that, RIM has dropped prices on its handsets, leaving profitability tied to its services like its BlackBerry Messenger (BBM).

Given that RIM has about $2.3 billion in cash, it isn’t about to go out of business in the immediate future. Whether that does eventually happen depends on the success of the new and much delayed BlackBerry 10 platform that is finally due to be released next year.

Whether this will be a success will depend in part on RIM’s ability to convince developers to develop applications for the platform. This in turn may help convince business users not only to not abandon the platform but new corporate users to choose it above Microsoft’s new Window Phone platform, Google’s Android or Apple’s iOS.

In a word: Buckley’s (for non-Australian’s this translates as “snowball’s chance in hell” or similar sentiment).

Much of the BlackBerry’s success to date has stemmed from the messaging services. RIM succeeded in the corporate world initially because of the simple fact that at the time, there was no competition and their product appealed to the IT crowd by ticking off the right boxes of being secure and manageable. Microsoft’s early phone platform, and the phones that supported it, were largely unusable. By comparison, the BlackBerry was appealing, especially to the more mobile employee.

With the iPhone 3 however, all of this changed. Apple eventually provided enough support for corporate email platforms like Microsoft’s Exchange to allow for the iPhone to be embraced as a business tool. The employees, some taking part in the “Bring Your Own Device” revolution, did the rest.

The final nail in the coffin was the fact that the BlackBerry is relatively expensive compared to other devices. Companies such as IBM and Qantas have recently announced the move from BlackBerry to iPhones. IBM Australia was reported to be saving up to $1.4 million per year as a result.

For the business market, as far as RIM is concerned, the ship has sailed. The only thing that is stopping this being a haemorrhage is the inertia of some companies to take decisions to move onto a new platform. But even the laggards will eventually change. It is beyond credulity that any company would actively move onto the BlackBerry platform at this stage.

RIM’s only other hope is cheap end of the smartphone market, especially in markets such as India and Africa. Here, the bundling of free messaging to other BlackBerry users has held some attraction. Even here though, there has been increasing pressure from Android and a plethora of phone companies servicing the low end of the market. Apple’s release of iMessage, which is free to other iPhone or iPad users, has further eroded any potential benefits of the BBM platform.

RIM’s phones represented only 2 per cent  of 2012 second quarter mobile phone market share. To a certain extent, it is already largely an irrelevance, shipping fewer phones than HTC, Huawei, ZTE and even Motorola. As a platform, it represents 5 per cent  of the market compared to 64 per cent  for Android.

For RIM, the outlook is bleak. Its value is in its services and patents. These have been estimated at being worth about $3.5 billion. With the cash that would be left after expenses of restructuring, RIM would be significantly cheaper than Motorola was to Google. Microsoft or Samsung could be potential suitors.

It is not that uncommon these days to have business people apologise for still having to use a BlackBerry phone. It is the phone equivalent of having Windows XP and Internet Explorer 6 on your 10 year-old Toshiba laptop. For those users, RIM’s demise offers some hope of forcing their executive decision makers to make the move to a modern phone supported by an extensive business application ecosystem.

David Glance is a Director at the Centre for Software Practice at The University of Western Australia

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