Can RIM Save Itself?
Research In Motion faces enormous challenges to rebuild its struggling BlackBerry brand after a dramatically difficult year, but there is hope for a comeback.
The Ontario-based company faced employee layoffs, plummeting sales and market share, service outages, legal troubles, technical delays and widespread criticism of how its top leaders handled the mounting challenges.
Still, RIM maintains a loyal base of business customers and strong sales in emerging markets. If the company can successfully launch innovative new products that highlight its trademark security features, its chances of surviving without major upheaval are good, especially if it can leverage its assets to regain lost ground.
RIM Lags with Outdated Hardware, Flawed Software
RIM faces a formidable slate of challenges, the most prominent of which is a lack of compelling devices in its product line. During a busy holiday season where Apple’s iPhone 4S and Android devices like the Samsung Galaxy Nexus and Motorola Droid Razr dominated, RIM failed to release any new hardware.
Its most recent product upgrade, the BlackBerry Bold, looks nearly identical to the familiar model popularized several years ago, with only a slightly larger screen.
RIM has attempted to broaden its product line, with near-disastrous results. RIM released its first tablet computer, the PlayBook 2.0, in the spring, but sales were underwhelming to say the least. Priced identically to the iPad 2, the PlayBook couldn’t compete with its faster and larger rival, and by the end of the year, dramatically reduced prices on the tablet to try and recoup a fraction of its lost profits.
Besides the products themselves, the device maker failed to compete in the last year with its OS and apps, being left in the dust by its rivals Android and iOS. The company’s QNX software, on which the current BlackBerry 7 operating system is based, received criticism upon its release for lacking innovation. The software was ultimately proven hackable in spite of RIM’s reputation for top-notch security on BlackBerry devices, worrying loyal business enterprise users who stuck by BlackBerry largely due to their secure corporate email system.
RIM also failed to compete with Apple and Android in the burgeoning apps and mobile games market. The BlackBerry App store offers only a fraction of the options available in Apple’s App Store and Android market, and research continuously finds mobile app options to be a top incentive for consumers when choosing a smartphone. As a result, RIM struggled to attract talented new developers, who prefer the exposure and income potential of creating apps for iOS and Android.
RIM is in the process of developing a new operating system named BlackBerry 10 that the company claims is quick, user-friendly, and innovative, but repeated delays have pushed the new platform’s release to the second half of this year, which may be a major tactical mistake in a brisk market.
The BlackBerry London, expected to be the first device to run the new operating system, will likely be delayed as well, leaving the company with no new products on the near horizon. If the absence of products continues, consumers will likely abandon their BlackBerries for flashy new devices with modern upgrades, especially as the pace of the market quickens.
BlackBerry Faces Shrinking Market Share, Drops in Company Value
Lack of commercially viable products is a major concern for shareholders and investors. RIM saw a 35 percent decrease in U.S. market share, as Android and iOS gained to dominate the market with a slew of popular handsets. Over the course of the year, RIM’s stock fell by nearly 70 percent.
Financial troubles led the company to lay off more than 2000 workers over the summer, and by the end of the year, RIM stock traded at below book value for the first time in nine years. Even if RIM wanted to offer itself up for acquisition, the depreciation of its value would make the company a difficult sell.
Leadership Lacks Vision
RIM’s Co-CEO’s Mike Lazaridis and Jim Balsillie took a lot of heat during the string of crises that occurred. The two leaders, also the second and third largest stockholders in the company, stood staunchly by their failing brand, banking on customer loyalty even as users increasingly fled from BlackBerry.
Frustrated investors from Northwest & Ethical and Jaguar Financial, among others, urged RIM to retool its corporate structure and consider a merger or sale, but Lazaridis and Balsillie steadfastly refused to step down or restructure.
The CEOs also failed to respond quickly to a four-day BlackBerry service outage in October that affected nearly 70 million customers around the globe, occurring just days before Apple’s release of the iPhone 4S. RIM’s slow and tepid response to the crisis reignited criticism over both its single-server system and its top leadership.
Caving under pressure, RIM agreed to a six-month governance review of their leadership practices, the results of which are due at the end of January. With the company in such dire straits, the results are likely to be ugly, heralding some major changes at the top.
Business Market, Security Remain Bright Spots
A new leader would inherit a sinking ship, but RIM possesses some significant assets it can use to help pull itself back to its once prominent position. The company boasts a core base of loyal corporate business customers likely to respond positively to new hardware and software upgrades when they’re released.
In addition, the BlackBerry PlayBook remains the only mobile device to receive highly coveted U.S. government security clearance, clearing it for use by federal authorities. Hackers claimed to infiltrate the device in November, but RIM quickly released a patch, and BlackBerry mobile devices continue to offer top-notch security. In a world of mounting privacy concerns, security is still highly valued.
RIM also announced plans to create a version of its secure software for iOS and Android, a smart move that could play up its best feature and help gain some much needed revenue while consumers await new devices and software.
Emerging Markets Offer Some Momentum
Research In Motion retains a strong and building presence in emerging markets like Asia, the Middle East, and Indonesia, where the release of the BlackBerry Bold in November resulted in near riot status. The company faces some hurdles to come to agreements with various governments, but millions of customers continue to flock to BlackBerry’s Instant Messenger service, BBM, and show no signs of slowing down.
If RIM can maintain its significant presence in emerging sectors, the company can rely on its global revenue to keep it afloat — and shareholders content — until it decides on a new strategy in the West.
New Leadership On the Horizon
Rumors are already circulating that RIM plans to oust Mike Lazaridis and Jim Balsillie from their longtime leadership positions and bring in a fresh perspective in the form of a new CEO. Critics are calling for visionary leadership that focuses on the future of mobile technology while keeping BlackBerry’s strongest features in place, and a fresh face could also give the company’s flailing reputation a much-needed energy boost.
BlackBerry Still a Major Brand
RIM’s former reputation is perhaps its biggest asset, even in spite of recent troubles. The company pioneered the smartphone trend and remained dominant for years before its fall from grace, and nostalgic consumers may root the company on with a show of support if its new devices are comparable to other current offerings from Apple and Google.
RIM faces significant obstacles to rebuild its brand, customer base, and reputation, and in a fast-paced market, predicting outcomes is difficult. The fact that it’s still standing today is a testament to the company’s determination. With a few smart moves, like an innovative smartphone running a sparkling new OS, and perhaps a new marketing push, the BlackBerry maker stands to reverse its fortunes, but it will need to face up to market realities and make consumers its top priority.
