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Is Research in Motion (NSDQ: RIMM) turning into Palm (NSDQ: PALM), the next big prize in the mobile industry’s consolidation?

Two of the mo…

PlayBook

Is Research in Motion (NSDQ: RIMM) turning into Palm (NSDQ: PALM), the next big prize in the mobile industry’s consolidation?

Two of the most important companies in the prehistoric era of the mobile computer (late 90s to mid 2000s) were Palm, inventor of the Palm Pilot and nurturer of the Treo, and RIM, which introduced a generation of business professionals to the value (and burden) of constant access to the office through the BlackBerry. But then came the iPhone, and Android. After a pretty hard fall and then a solid-but-unsustainable comeback with the Pre and WebOS, Palm was rescued by Hewlett-Packard (NYSE: HPQ) at the expense of a storied brand. RIM’s efforts to do something similar–bet the farm on a new operating system as well as a new form factor–are being treated with the worst of all reactions: indifference.

Two and a half weeks before RIM is scheduled to unveil the Playbook, its first tablet computer, it disappointed investors with its latest earnings report. Even more tellingly, it admitted that in order to achieve what co-CEO Jim Balsillie called demand for a “tonnage of apps” that RIM will support applications from a competing platform, Android. While the prospect of weaker profits and revenue over the next few months caused investors to flee RIM’s stock in droves on Friday, the bigger problem is long term: despite the face it still a huge player in the lucrative U.S. market, carriers, developers and investors are wary about betting on RIM.

Rotten berries:A week’s worth of conversations with various members of the mobile industry at the CTIA Wireless conference produced little evidence of enthusiasm for either the Playbook or RIM development in general. Apple’s iOS and Google’s Android are both well-designed modern operating systems, but what has really helped them succeed is the overwhelming support of application developers, who know that they must be on both platforms to be seen as relevant.

Hardly anyone feels the same way about the BlackBerry OS, now an aging platform that’s almost in the same situation Palm found itself in a few years ago with the nearly-defunct Palm OS. Even Microsoft’s Windows Phone 7, with just months on the market and not even close to as much market share as RIM, is seen as a more intriguing platform.

The Playbook runs a new operating system built by QNX, a company RIM acquired in 2010. But developer support for that new operating system has also been rocky. One prospective RIM developer named Jamie Murai railed against the company’s difficult Playbook development process a month ago, writing “You have succeeded in your quest of driving away a perfectly willing developer from your platform.”

And the way RIM is going to add support for Android apps could be counterproductive. Android apps will need a special “app player” in order to run correctly on Playbooks, and the Playbook will only support apps written for Android 2.3; not the Android 3.0 version designed specifically for tablets. That means the apps may not run very well and may look funny on the much-larger screen used by the tablet compared to the smartphone screens for which they were designed. And should that happen, Playbook users will direct their ire at both RIM and app developers.

Mistakes were made: What has happened to RIM, a company whose flagship product just a few years ago was good-naturedly compared to one of the most addictive drugs known to man? Any number of fingers can be pointed at factors like NTP, which distracted RIM’s upper management for years with a bitter patent suit that eventually cost the company over $600 million and untold legal fees. Maybe it was RIM’s conservative base of IT managers and corporations, which didn’t push the company to develop the Web browsing and application-development features that consumers gravitated toward once Apple (NSDQ: AAPL), and then Google (NSDQ: GOOG), showed them what could be possible. The company’s continued focus on hardware over software as its differentiating factor, when the industry was tacking the other way, certainly didn’t help.

It’s impossible to completely write off a company that still has sizable market share and profits, as well as a recognizable brand. But it’s also impossible to argue that RIM is on the cusp of turning its fortunes around: the Playbook is simply not compelling enough compared to either the iPad 2 or even the Xoom to be recognized in the mass market, and developers aren’t willing to help make up the difference. Meanwhile, RIM’s smartphones look increasingly pedestrian against iPhone and Android models, not to mention Windows Phone 7.

Curious statements from the company’s leaders certainly don’t help. Mike Lazaridis, RIM’s other co-CEO, wasn’t quite as clueless as some made him out to be in an appearance at the D: Dive Into Mobile conference in December, but he did speak in the type of jargon and vague syntax that only a management consultant could love, rather than addressing concerns about RIM’s strategies head-on. On Thursday’s conference call, Balsillie said anticipated demand for the Playbook was strong, citing several companies wanting to order “tens of thousands of units.” He must know that even the most conservative estimates for iPad 2 sales so far, after just two weeks of sales, are in the 5-million-unit range, and most are quite higher.

Lead, Follow, Merge: What does RIM need to do to get back on track? The only nice thing about a slow decline is that it gives RIM’s management some time to figure how to get its groove back. But RIM is in need of a breakthrough: it’s the same kind of problem faced by those trying to chase Google in Web search. They can’t just try to match Google blow for blow, they have to come up with something truly different and compelling to shift user behavior.

RIM hasn’t come up with a product like that in years. And it seems pretty clear that Android support or not, few outside the company think the Playbook will change anything. Could it be time for drastic action?

HP bought Palm as part of an attempt by an old-school PC company to get in on a new generation of computing. We’ve known for a long time that consolidation of the five surviving mobile operating systems is inevitable, and perhaps the old-school PC company, Microsoft (NSDQ: MSFT), is finally ready to make an honest man or woman out of all the rumormongers predicting a Microsoft-RIM merger for years. With a market cap of only $29.5 billion following Friday’s sell-off, and an enterprise-oriented customer base already friendly with Microsoft, there might be no time like the present.

  1. “But, if you could see our roadmap of future-proof devices……”

    Yeah, we would see there’s no proof of a future for Rimm under visionaries like Silly & Lazy.

    Ayuh

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  2. A perfect Ouch… too soon though. Refactor the reasoning and you find that iPad has only pushed business value use-case much higher on the pent-up-demand meter… for those businesses that want a tablet solution and refuse iTunes tethering of one creditcard-on-file per device. NO CIO can tolerate that reality.

    They actually are very frustrated it has taken RIM this long. HP let them down is partly why. I see roadmaps — all speculation based on mobile enablements that are expected to become managed by IT for business purposes. The playbook will likely sell out and become an issue of under-supply, not for consumers, but for B2B guys in conference rooms that need to make this tablet thing work. Make no mistake… they are NOT HAPPY about promises that dont happen and demand that is leaving money on the table. I am one of those hidden asset guys writing this code and very tired of false-urgency and half-baked crashy SDK simulators.

    dudes…. fix it and ship it already

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  3. This story is nonsense. The author has written off the Playbook which isn’t out yet and written off RIM after they grew profit 34% in the last quarter. 99% of companies would love to have RIM’s growth.

    The thing that most RIM critics miss is that in spite of loosing market share, they can still thrive in this rapidly growing market. Yes RIM needs better handsets but they are on the way, they are hardly down and out.

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  4. As John Sculley said in the mid 80s, nobody remembers number 3 (think Coke, Pepsi and 7up). Developers just can’t afford to write code for 3 OS’s

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  5. If Microsoft were to buy RIM, the fallout would probably kill both companies. Microsoft does a billion dollar deal with Nokia, getting them to drop Symbian, QT and Meego, in return (one would have to believe) for making Nokia the preferred WinPhone 7 partner. LG, HTC, Samsung, must be somewhat concerned, and Moto has already said no way to WinPhone.

    No imagine if they purchased RIM. There are two basic options:
    1. RIM drops the Blackberry OS and QNX, adopting WinPhone 7
    2. Microsoft drops WinPhone 7 as their “primary” mobile OS and begins to promote BBOS.

    Any manufacturer that makes a phone supported by Microsoft is crazy. They would have to be ready for Microsoft to turn on them at a moment’s notice. Can you imagine what the Nokia board would do to Steven Elop?

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  6. “It’s impossible to completely write off a company that still has sizable market share and profits, as well as a recognizable brand.”
    No, it is not.
    Take a look at the history of DEC. It went from the 2nd largest computer company in the world to irrelevance in very short order.
    Take a look at Apple. In the 90s it went from 20% marketshare to 2%.
    Tech can be very brutal.

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  7. Rim is a old school imperialistic, bureaucratic, rotten-to-the-core slave driving bourgois of a vastly outdated, outmoded, and labour union-ridden 18th century slave shop. Observe how Rim totally belittles its human capital. Rim always buys outside companies, never developing or even innovating its own platforms. Rim employees rank among the lowest in both quality and morale. Rim key personnel routinely got screwed by the predominantly deadwood workers who squeezed out the very few talents carrying Rim on their shoulders. Rim cannot change that acidic culture.

    Success at Google, Apple, all come from corporate endorsement of talent, and quality. Rim is at the other polar extreme treating talent like shit. Any surprises why Apple and Google just walk all over Rim? All the greatest companies in the world value their talents and quality. Rim is out, there are no doubts whatsoever. It’s just a matter of a very short time when Rim goes bankrupt.

    Microsoft cannot mix with Rim. Microsoft treats its employees like sons and daughters. Rim treats its own people like shit. A Microsoft / Rim is a total impossibility. Nokia is much like Microsoft in its good treatment of its human capital. At Rim, the human capital get wasted, loaded down with deadwood, Rim is going the way of the old slavery plantations, and imperialistic sweat shops.

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  8. Tom Krazit writes “It’s impossible to completely write off a company that still has sizable market share and profits, as well as a recognizable brand.”

    I’ll join DaveBarnes in asking “where the hell have you been ?!” in making such a naive comment. Look at what happened to vaunted General Motors in a short two years! Look at what’s happened to vaunted Nokia in even less time! Nothing is impossible anymore. Today’s global marketplace is unforgiving to those businesses that can’t flex to meet market demands. If and when Apple and/or Google makes a serious run at the Enterprise then RIM will slip off their already slippery slope.

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  9. The only reason why I got a blackberry is because of the great form factor, great battery life, simple UI, totally great qwerty keypad and great carrier offers here in our country. But I should say that android handsets are totally cool.

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  10. @davebarnes @eludium Q36: All I meant was RIM is not going out of business just yet, not that they don’t have systemic problems that need to be fixed. The companies you mention (DEC, Jobs-less Apple, GM) were all floundering for 5-10 years before they hit rock bottom.

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