13 Comments

Summary:

If I said one of the leading smartphone companies faces a decline in market share as it works to transition to a new mobile operating system, would you say I was talking about Nokia? That would be right, but Research In Motion is just as correct.

blackberry-touchbold-featured

One of the leading smartphone companies faces a decline in market share as it works to transition to a new mobile operating system. Nokia aptly fits that description, but it’s beginning to apply to Research In Motion as well. As the company slowly changes over from the BlackBerry OS to a new platform called QNX, more nimble competitors are stealing away sales, causing RIM to lose both market share and consumer mind share. ComScore  today shows RIM’s U.S. share of smartphones at 25.7 percent in April, down from 30.4 percent in January.

The numbers from comScore aren’t based on actual sales data, but instead are from a statistically significant survey of more than 30,000 consumers, which represents ownership trends. The trend of people owning a smartphone from RIM is down, just as it is for Microsoft and Palm, while Google and Apple continue to grow at the expense of others. While RIM, Microsoft and Palm all lost market share, RIM’s decline was the largest. Platform transition may be partly to blame: Microsoft and Palm have already abandoned legacy mobile platforms, while RIM is only in the midst of doing so. Even worse, it hasn’t clearly stated how long the move from BlackBerry to QNX will actually take.

The analysts at UBS seem to agree with my fears. UBS said in a research note issued Friday on the company, while lowing its target price on RIM stock to $45 from $60:

While Nokia’s challenges appear more cumbersome than RIMM’s, what is evident in the mobile industry is that platform transitions can be difficult and profitability transitions (from peak to trough) quite dramatic and sudden. We believe RIMM risks a similar outcome (perhaps with a longer tail given its lucrative Services revenue stream) unless it makes bold moves and executes on the migration to its next generation QNX operating system flawlessly.

Transitions are never easy, but RIM isn’t making it any easier. Earlier this month, the company announced new Bold handsets, the 9900 and 9930, complete with BlackBerry OS 7. The devices use more capable hardware but the software revision is still based on the old BlackBerry platform. These handsets then, aren’t using the new QNX platform that runs on the BlackBerry PlayBook and there’s no guarantee they ever will. Currently available handsets don’t appear likely to even get the BlackBerry OS 7 update, so they’re effectively two versions behind once RIM completes its transition.

As if that weren’t enough of a challenge, there are reports today that the new Bold devices are delayed until September. Not only is the company moving to slow to transition to the QNX platform, but it could run the risk of losing momentum for new hardware, even as improved Google Android devices continue to arrive on store shelves each month. BGR cited several sources regarding the delay, and also says that BlackBerry OS 7.5 may still be in the works before QNX lands on RIM handsets.

Between a slow transition to a promising new operating system and potential delays for smartphones that still run older platforms, the road ahead for RIM looks to be fraught with peril. Even the best hardware keyboards in the business and the company’s flagship BBM service aren’t enough to cover up the age lines of sluggish and non-intuitive software.

  1. It may sound a bit odd – but if they only jumped on the Android wagon soon enough – they could have made special devices with their own “sense” like layer on top – built for the professional audience. Android is still bare enough on that front to allow them differentiation and market share. with their reputation it might have even worked. Again it may sound a bit strange but most of us knew that their OS stands no chance. Palm and Symbian too. The writing was on the wall for a long time. Product and corporate strategy failed I guess.

    Share
    1. Lucian Armasu Saturday, June 4, 2011

      The writing has been on the wall for many years. I don’t think they’ve even realized this until perhaps a few months before they bought QNX, and even then they probably did it mostly to have a tablet strategy, not necessarily to switching their smartphones to it. The evidence of that is the fact that it will be a year after Playbook launched until they launch some QNX phones (early 2012 my guess).

      I’ve spoken to someone working at RIM since before they bought QNX and tried to warn them about iPhone and Android, but she wouldn’t even listen, and told me everyone at RIM had no worries, when in fact they should’ve been very worried about Android and iPhone.

      Why were’t they worried? Well, in classic “incumbent gets disrupted”” situation, RIM was still making a lot of money and experiencing increased revenues and record total profits. This was happening because they were still making money from new countries they entered where Android and iPhone weren’t yet everywhere. This hid their decline in North America very well, because as a company overall they were still growing.

      However, they didn’t pay attention that Android and iPhones determine a trend that would soon happen in all countries they were in. It was just a matter of time before they caught up, and started replacing Blackberries just like in USA. I guess either RIM’s CEO’s didn’t see this, which would mean they are not visionary enough, or they chose to ignore it with wishful thinking, just like Nokia had wishful thinking about Symbian, hoping that if they improve it enough it would actually compete against Android and iPhone, instead of making some dramatic changes in their company early on.

      RIM followed the exact path of Nokia. The only reason the decline is obvious much later than for Nokia, is because RIM is mostly an enterprise company, and we all know changes happen slower in enterprise. But they should’ve seen it coming years ago.

      Share
    2. Unfortunately the Android platform (being a Linux kernel with an Andriod Dalvik Virtual Machine running on top) would have far too many security holes for Blackberry devices to use. Especially since it is open source. QNX is by all measures a superior Operating System to anything else on the market currently, and much more efficient, allowing the user to do much more with less powerful handsets. If QNX is able to translate into the consumer smartphone space waits to be seen though. But QNX is already the most used operating system worldwide for mission critical applications.

      Share
      1. VX Works WindRivers is faster than both Linux and QNX. But guess what it doesn’t matter. Linux has gained mainstream acceptance and is slowly eating up both the high end UNIX market and the low end Windows market.

        QNX has a very small marketshare. In fact Embedded Windows XP has a larger marketshare than QNX.

        The problem with Blackberry is they add Blackberry tax to use something they can get for free from other platforms.

        Share
  2. Nokia? Dead! Niedermeier? Dead! RIM? On its way to becoming a messaging software company after its board and executives have suffered a whole lot more humiliation.

    Share
  3. Prof. Peabody Friday, June 3, 2011

    Kevin, you argue that Microsoft’s and Palm’s share is not down as much as RIM’s because they have already dropped their legacy platform, but I think it more likely that their share isn’t dropping so much because it’s already reached the lowest point it’s likely to go before complete collapse.

    Palm’s share in particular is made up entirely of people who really believe in the platform. The old die hards from the early days who won’t give up until Palm is completely dead. Every product has this reservoir of core believers, it seems likely to me that Microsoft and Palm are in exactly that situation right now, whereas Blackberry still has followers who haven’t realised the dire straights their favourite company is in.

    Share
    1. You could be right — and I think we’re actually close to saying the same thing — but I don’t agree that Microsoft and Palm are ready for complete collapse; at least not for a while yet. Microsoft will likely continue to invest whatever amount of money it has to in order to stay relevant (or semi-relevant) in the mobile space. HP isn’t going to turn away from the $1.2b it spent to get Palm either. Not saying that these two don’t have issues, but they’ll be around for a bit just yet. ;)

      Having said that, I think you make a good point about who may be buying or holding devices from each. And if RIM doesn’t execute quick enough on its transition, it runs the risk of facing a similar situation, although I suspect they’ll survive. Will they ever have the same market share they once enjoyed? That’s a different question.

      Share
  4. RIM 100% deserved this collapse, because, they were forewarned that the whole smartphone landscape was going to radically change, which it has so rapidly. They actually needed to make the right decisions 2 years ago in order to be prepared for today’s market realities. They are really 2 years behind now, because, the QNX software, first edition, will be an initial first stab for something new, where there will be subsequent patches, updates, and other add-ons, all of which takes time. RIM’s first big trouble came when Verizon told them “adios amigo”, for junky, clunky Storm 1 & 2. Verizon was begging RIM for a competitive product against the Iphone, and the Storm was a dud. Google could see that RIM was missing the boat badly, and their brilliant engineers rapidly invented Android–and the rest is history.
    Nobody had the guts to sue giant Google for illegal free stuff. Traditionally, businesses are not suppose to give free stuff to beat out a competitor. But Google was given a free pass.
    The mistakes by RIM will be legend when they finally bite the dust. The story of RIM will be taught in the colleges and universities on what not to do to destroy a brand and company.
    QNX was bought as an afterthought for the idea of mobile devices inside vehicles. Now, RIM thinks QNX is its savior, when, so far, nobody, but nobody in the expert tech world thinks there is anything that special with QNX.
    The worse part of this story is that the Asian smartphone makers, with Motorola, are going to flood Android phones everywhere with practically no profit margin. Today, T-Mobile announced a good Android phone for just $80 and two years. RIM cannot even come close to that. RIM’s playbook is not going to make any money for RIM, for the same reason, is that Asian makers will flood cheap but popular Android tablets at rock bottom prices. RIM will learn that it cannot make any profit on the Playbook, as the prices will go down in the marketplace over time.
    The handwriting is on the wall. RIM is history in the making now, and there is nothing they can do that can stop that, except, and repeat, except, immediately sell an Android Blackberry phone, that offers the best of both worlds. That is their only slim chance, is to sell an Android phone that offers BB phone features. Good night RIM.

    Share
    1. Actually, you got something backwards. Almost everybody in the tech world understand the power of QNX, and how it is (from a technical standpoint) heads above the kernel structures of iOS, and worse-yet Android devices which run in an emulator. The problem is, the general public don’t always care about which device is technically superior. Just like the videogame world. Sony’s PS3 is a technically superior gaming platform, but Nintendo’s Wii has outsold it 3x over to date.

      But the tech landscape changes quickly. No one predicted the Motorola Razr (still the #1 selling phone of all time) would end its reign so quickly either.

      Share
  5. RIM and Nokia are BOTH sinking ships! Their old models of making phones that were not ecosystem friendly and just not touch-centric, which is the new thing powering the nearly 50% adoption rate of smartphones in the US is what is behind their demise. Microsoft + Nokia is on the right track.

    http://mythoughtsontechnologyandjamaica.blogspot.com/2011/05/apple-android-beat-nokia-rim-globally.html

    Share
  6. RIM has a better position than Nokia. QNX has real potential and a great system core. I am seriously doubting that WP7 can play in the same league. It will take a lot of time to convert the RIM portfolio to QNX but once the transition is done RIM should be capable to stabilize results. Microsoft lost from Jan 2011 to April 2011 again 1.3 % market share – and that with! WP7. So where is the growth potential for WP7? Is it Nokia which is just falling apart? I know that there are millions of Microsoft lemmings out there who are hating to face the facts but Microsoft will most probably have a hard time even to bypass RIM, especially with Charlie Brown as the manager.

    Share
  7. RIM is so behind the curve in the SmartPhone game that I’ve been eagerly waiting for the numbers on their decline.

    Share
  8. What everyone is failing to understand is in the consumer space the Blackberry is eroding but in the Enterprise they are firmly entrenched. Your IT department could care less if you can play Angry Birds on your device and in many companies they still hand Blackberries to employees for business.

    The landscape is definitely switching – the new trend is that a lot of IT departments are allowing their employees to add their personal devices to the corporate email system and in some cases we are seeing the transition to iPhone/Android as a corporate standard.

    The thing behind RIM and where they really make money is with the BES – the email system is the most secure period. Android/iPhone have activesync but you can’t compete with the inherent security of the BES.

    It’s a slow erosion and in the consumer space RIM is floundering – the OS7 decision to make 6 codeline basically end of life is a rough decision since they are basically talking about the plan to go from OS6 to OS7 (you can’t upgrade btw) and then to a QNX environment.

    There is an uphill battle and in general it looks like RIM will be where they are for quite some time – as market cap drops however I wouldn’t be surprised if someone scooped them up and added BES to their offering.

    Share

Comments have been disabled for this post