Analyst Report: Research In Motion: future scenarios and its likely fate


It’s all too easy to pile on to the RIM-bashing bandwagon. The company’s spectacular fall is the stuff of water-cooler chatter, and it will doubtless end up as the subject of dozens of business-school case studies. Wall Streeters are unloading the stock, users are leaving en masse to Android and iOS, and even the long-loyal enterprise customers are taking their 1,000-phone accounts and moving to new hardware vendors. Meanwhile the management and board of RIM are the targets of scorn.

It’s fair to say some of that scorn is merited. Lots of shareholder value has evaporated. And RIM is guilty of making errors. But the company’s problem mainly stems from one mistake: a prolonged and colossal failure to keep pace with innovation in the marketplace. This error is not on the order of months, which is enough of a lag in this industry to cost you market share. No, it’s on the order of years, and still counting.

When the iPhone dropped in 2007, RIM execs downplayed the threat. Often, that kind of response is just posturing — putting on a brave face. In RIM’s case, it was perfectly honest hubris, which is much worse. The company carried that unwarranted hubris and lackadaisical competitive response forward for a few years while sales, revenues and profits remained strong. Its weakness was hidden by a rapidly growing global appetite for smartphones.

It wasn’t until the market share began to shrink and profit numbers began suffering that the warning bells started to ring in Waterloo, Ontario. Now RIM would have to fight on its heels, not from a position of strength. But even after this realization, RIM’s reactions were terribly slow. A credible browser took an acquisition and then years. Now OS upgrades are glacial. Devices are repeatedly delayed. Tablets are rushed out buggy and sans email. Perhaps RIM could have been excused for taking one to two years to come up with a credible response to the iPhone (and eventually Android), but every armchair CEO out there knows that over five years is just irresponsible.

For now let’s get beyond the finger-pointing, because RIM is a different firm today than it was in 2007. It has new management, a full awareness of the gravity of the situation, restless investors, an upcoming OS release and a number of lingering advantages that can still be leveraged. What might the future hold for RIM? CEO Thorsten Heins has said he plans to surprise critics with RIM’s transformation. But in case you don’t like surprises, here’s a brief look at the most likely scenarios for RIM going forward and their probability of occurring.

Table of Contents

  1. Summary
  2. M&A target scenarios
    1. Private equity
    2. Divestiture
    3. RIM is boosted by the faithful
    4. IP asset buyer
    5. Market-entry buyer
  3. Recovery scenarios
    1. Enterprise market retrenchment
    2. BlackBerry 10 is awesome
    3. RIM adopts Android (or Windows Phone) OS
    4. Software-licensing tithes
  4. Conclusion
  5. About Derek Kerton
  6. About GigaOM Pro

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