RIP, RIMM?

The wireless industry is a constantly shifting battleground of ruthless competition, changed allegiances, breathtaking innovation, and unmet expectations. Companies like Motorola Mobility (NYSE: MMI  ) are left for dead one year, only to hit a home run with the first full-featured Android phone, the Droid. AT&T (NYSE: T  ) injects new life into its service by signing on with Apple (Nasdaq: AAPL  ) to be the exclusive cellular provider for the groundbreaking iPhone, then winds up taking heat from everyone when its network can't handle the traffic. And then there's Research In Motion (Nasdaq: RIMM  ) .

Eulogy for a failed innovator
So here's the story. This company practically owned its product space. Then other companies started eating into its market share, making strategic acquisitions to improve the quality of their own products. Doubts began to surface about the company's moat. Innovative new competing products promised similar functionality coupled with applications the company couldn't offer. It promised to roll out a killer product that would marry the best of its technology with the new competition, and when the product was finally released, it was a huge disappointment. The company's stock price never recovered, and annual revenues dropped each year from 2008 to 2010.

Wait, you say, Research In Motion's revenues are rising, not falling! That's because the story I just told is about Garmin (Nasdaq: GRMN  ) . Just plug these items into the story: TomTom outbidding Garmin for Tele Atlas and producing an iPhone navigation app; Verizon launching the VZ Navigator service on a phone platform that also supports music, text, email, and video; and Garmin's Nuvifone flop. All of that happened before the first Android became a dominant operating system offering free navigation features.

Deer in the headlights
Garmin's failure is a cautionary tale for Research In Motion. Certainly, the BlackBerry maker deserves credit for bringing mobile email to the enterprise. Nobody does it better or has a larger global footprint. But RIM may have underestimated how powerful four little words could be to consumers: "Sent from my iPhone." BlackBerrys are functional but hardly sexy. iPhones and iPads do email elegantly, along with everything else. Phones and tablets that use the Android platform are tightly integrated with Google's (Nasdaq: GOOG  ) Gmail service. So much for the moat?

No wonder, then, that RIM jumped quickly on the tablet bandwagon. Its first tablet, the PlayBook, was released in April. Reviewers were not impressed: It uses a proprietary OS, has navigation controls different from other tablets and previous BlackBerry devices, and cannot do email unless it is near a BlackBerry phone or on Wi-Fi. Sales have been lackluster, although one could say that about any tablet that doesn't have an Apple logo. RIM's stock recently hit a multiyear low.

What doesn't kill you will make you stronger
What is happening now is a true technology shift from phones with advanced functions to portable computing devices that include phone features. Research In Motion has a window of opportunity, right now, to adjust its product strategy and survive. If it can smoothly and quickly integrate BlackBerry email service with an Android- or iPhone-like user experience, its corporate customers will stay on board. It could even develop a full-featured "BlackBerry app" for Android and iOS and get out of the hardware business. RIM has an enviable loyal customer base and its revenues are still growing, if more slowly than three or four years ago. It has no debt, 33% free cash flow growth, and a trailing P/E of 6.9 and the stock looks like a no-brainer for the long-term investor. But, those are all things that were said about Garmin before it began its slide, and Research In Motion owes it to its shareholders and customers to aggressively adapt to the new wireless landscape.

Fool contributor G. David Frye owns shares of Apple. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended Apple and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (16) | Recommend This Article (10)

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  • Report this Comment On May 20, 2011, at 3:32 PM, etgh wrote:

    Today I happened to be in a Best Buy mobile store and asked the store clerk how the Playbook was selling ? In his own words "we were blown away, we didn't expect it sell like it has" ! He went on to say that folks love the super fast user interface and the smaller form factor.

    Interestingly he mentioned the business folks realized the entertainment bend of the iPad when they compared it to the Playbook.

    Once all the standalone functions are in place, I suspect the Playbook will be a worthy competitor to Apple.

  • Report this Comment On May 20, 2011, at 4:34 PM, sk8ertor wrote:

    The author should know that the PlayBook can do email. Go to gmail.com on the browser. Go to ymail.com or hotmail.com. Is that so difficult? So you are WRONG, the PlayBook does do email. Also, RIM said native email is coming. Too bad Apple can't say Flash is coming... EVER!

  • Report this Comment On May 20, 2011, at 5:06 PM, mattack2 wrote:

    hotmail is not "email". It's "web-based email".

  • Report this Comment On May 20, 2011, at 6:16 PM, kjgfdlje4eiee wrote:

    RIP, RIMM ?? - i gotta love these headline- a company that has a foothold in corp/governments - and a hot selling tablet is rip? ha ha ha

  • Report this Comment On May 20, 2011, at 8:44 PM, gdf55 wrote:

    Blackberry phone sales 1Q11 were 3% of all cellphone sales and 13% of all smartphone sales. (Last year: 3%, 20%). The drop in the smartphone category should be worrisome.

    Here's a reference:

    http://www.gartner.com/it/page.jsp?id=1689814

    Blackberry tablet sales are too new to draw conclusions. Projections (again by Gartner) are for an eventual (2015) market share around 10%, and are based on the assumption that RIM will fix the lack of an email client and will probably sell mostly to existing Blackberry customers.

    Reference:

    http://www.gartner.com/it/page.jsp?id=1626414

    I think the gmail/hotmail alternative is misplaced. I'm not sure why anyone would be leaning toward a Blackberry platform except for the robust email service. RIMM says they'll add the capability but I suspect doing so means adding 3G service to the device, then figuring out how to charge for it.

    The measurement that counts going forward is the percentage of smartphone/tablet sales. My personal feeling is that RIM let the iPhone and Android platforms get too big a head start, and like Garmin's belated entry into the GPS cellphone market, will be playing catch-up forever.

    I wrote the article knowing that RIMM acolytes believe as strongly in their company as Activision fans. Even so, I appreciate all the comments. Keep them coming.

  • Report this Comment On May 21, 2011, at 1:36 AM, gslusher wrote:

    "and cannot do email unless it is near a BlackBerry phone or on Wi-Fi."

    That's a bit nonsensical. The PlayBook is WiFi-only--no cellphone connection, so it can connect to the Internet only through tethering or WiFi, but the same is true for any WiFi-only device. It seems that the author missed the point. The PlayBook does not have a native email client, so it cannot access POP or IMAP email systems EVEN IF it's connected via WiFi. The only way it can access one's email is through a web page. Thus, if one has an email address through a business, school, university, or major ISP, one may not be able to get email with the PlayBook, except, PERHAPS, via tethering to a BlackBerry. (Tethering to any other phone won't help, as that just provides an Internet connection. The BlackBerry actually provides the email client: the PlayBook is essentially a larger screen for the BlackBerry.)

    As for comments about gmail, hotmail, etc., do you really expect businesses to use these services?

    @gdf55: Adding a native email client wouldn't require a 3G capability. The WiFi iPad has one, as does the iPod touch and even my antique Palm TX. I read an article that suggested that the problem was that RIM couldn't get QNX to work with their email system before the PlayBook launched.

    If the PlayBook were revolutionary or the first of its kind, buyers might put up with missing features, as with the lack of cut and paste in the first iPhone. However, the PlayBook is not revoluttionary and it's not the first, second, third, or even 10th tablet.

  • Report this Comment On May 21, 2011, at 4:51 AM, infektu wrote:

    The Playbook has been announced as WiFi only, one can not complain that it doesn't do Edge or GPRS.

    A 3G(4G?) version has been announced for "later in the summer", so we'll see how that unfolds.

    The reviews from people that have actually _used_ the device are rather good, especially the extremely zippy browser.

    The comparison with the native email client on the iPad does not make much sense. Try using it that with a 10,000 entry address book and see how fast you can pull up a name. All BB's do it well, so I imagine they want to get this right on the PB.

    gslusher mentions possible difficulties when integrating the client on QNX, might well be the case, but it's no small feat and this is a totally unaddressed market yet. The existing tablets are for recreational use and some light business.

    As for the eye-candy, worry not, it's in the pipe.

    And if the new Bolds deliver as "liquid" as demo-ed two weeks ago we'll see a lot of reaction.

  • Report this Comment On May 21, 2011, at 5:34 AM, infektu wrote:

    p.s.

    The author makes some funny statements like:

    "BlackBerrys are functional but hardly sexy. iPhones and iPads do email elegantly, along with everything else."

    I beg your pardon ?!?

    You could say you don't like them for having a smaller screen (not the Torch), for being 1mm too thick or being the wrong colour.

    You can say "most people get them trough work, and they feel they don't have a choice".

    You could claim they're "slower" (although only the processor is, not the response, and that comes with double the battery life compared to the iPod).

    You could even say they're not sexy for not having round corners or the apple logo.

    But iphone doing email elegantly ?!?

    a 2nd one:

    You do you research poorly. You say Motorola hit a home run, but you do not bother to check the numbers:

    Between 2010Q1 and 2011Q1 your darling Motorola went from 9,574.5M units and a 2.7% share to 8,789.7M and 2.1% respectively. That's probably thanks to the Droid. Wait till you see the Droid pro :-)

    For the record, in the same interval RIM-s units went up from 10,752.5M to 13,004M, with their share steady at 3%. And this is a transitional year when they are working on QNX!

    And there goes the 3rd one, which is beyond joke:

    "[RIM] could even develop a full-featured "BlackBerry app" for Android and iOS and get out of the hardware business."

    Are you serious?!?

    RIM makes better hardware than pretty much anybody else, as they are, along with Nokia, the only ones that actually manufacture their products (as opposed to subcontracting everything in China and gluing a no-name GSM/GPRS/Edge module to a game console or an iPod).

    This is why their radios actually work and you don't have to hold them in a specific way. They consume less and they don't drop calls.

    They have much better coverage than most large screen "smart-phones" -- you can go twice farther from the cell tower.

    They can do with a 600MHz processor what others do with a 1GHz. That means their battery lasts 5 days instead of 2.

    But then again, it's easier to "write" based on hearsay, add little "bits" that are related to personal taste instead of actually doing a bit of research.

    If people in the industry worked like this we'd still be sending paper letters, scream from hilltops, pray to survive a cold and dream that one day we'll get farther than the closest town.

  • Report this Comment On May 21, 2011, at 6:40 AM, cduance wrote:

    RIM still have the biggest advantage in that they have BES. The Blackberry Enterprise Server is in many governments and businesses and for small businesses they can have it for free giving unrivalled security and encryption between the phone and the business. Encryption so good that the middle east are saying you are not aloud here because we can't decrypt it.

    I believe that RIM have also announced that they will be opening up BES in order to allow iPhones and andriod phones to pick up the system policies and allow for remote wiping etc. This is a very good idea as they have realised that the competition is not going anywhere and yet they will be able to sell a license for the BES server for a competitors device essentially free money for an already outstanding product.

    As for the playbook not having native email that was the way it was designed in order to protect the data from being lost if the tablet is stolen and as we all agree many laptops get stolen well if a playbook is stolen data is protected. That is something I am sure governments and large businesses will be pleased to hear after the number of reported incidents seems to be on the increase (might just be that they are reported more now though)

  • Report this Comment On May 21, 2011, at 10:58 PM, gdf55 wrote:

    @gslusher: The "or on WiFi" phrase was added to my article by the copy editor. I didn't write that, and I think it's a mistake. I do feel that the native-email-through-tethering choice was a kludge - it feels like a last-minute attempt to fill an important feature gap, but obviously I wasn't there when the RIM design team made the choice.

    WiFi is certainly capable of doing IMAP and/or POP. Some public WiFi sites block those protocols but it isn't inherent to wireless networking.

  • Report this Comment On May 22, 2011, at 1:17 PM, etgh wrote:

    InfoThatHelpsis clearly one of those who has totally bought into the "magic" of Apple. Apple does make great products but have you noticed, they always are more expensive to purchase and then always have subsequent additional costs in order to make them actually work ?

    When you buy Apple's products, you plug into a huge revenue extraction system, specifically tailored to separate you from your money. Look at the iPod, iPhone and now the iPad all designed to work seamlessly with a iTunes or App Store.

    InfoThatHelp is correct that Apple is well on its way to becoming a $ trillion enterprise and its this slavish blind devotion and a marketing Juggernaut that Apple customers will make this become a reality.

  • Report this Comment On May 23, 2011, at 12:16 AM, rmiers wrote:

    Rimm ( the blackberry is the only device the secret service uses.

    A few years ago, it was said, that if your brought a microsoft (windows) disc into a large (very large defense firm, you would be fired. A Russian satellite could read all info.

    I, for one like secure info and am not involved with any bad or unlawful stuff..

    I do not like goog, MSF, and the new scam keeping records unlawfully.

    They should be accountable just like credit agencies

    peace

  • Report this Comment On May 23, 2011, at 4:01 AM, deemery wrote:

    I have a Garmin GPS and then bought an iPhone. In the US, I'm now using the iPhone (Google Maps and Navigon). But in Europe, I went back to the Garmin device (so I didn't have to pay roaming data charges.) The Garmin interface was so piss-poor that a couple of times I was sorely tempted to open the window and throw the damn thing out.

    Apple continues to raise the bar for usability, and as a consumer that is A Good Thing. Cheap crappy technology is a false economy. The industry as a whole, as well as consumers, owe Apple for making technology so much more usable. RIMM ignores usability at its great peril!

  • Report this Comment On May 23, 2011, at 1:13 PM, Turfscape wrote:

    infektu wrote: "Try using it that with a 10,000 entry address book and see how fast you can pull up a name."

    Okay...seems to pull up fairly quickly. In fact, I'm rather impressed. It appears to work as well and as quickly as my Outlook does.

  • Report this Comment On May 23, 2011, at 1:16 PM, Turfscape wrote:

    etgh wrote: "Apple does make great products but have you noticed, they always are more expensive to purchase"

    You do realize that the Playbook is retailing for essentially the same price as the iPad, don't you?

    And, are you suggesting, somehow, that with Playbook you will never again have to purchase any software? Or will never again have to purchase any media (movies, songs, books, etc...)? I'm curious as to how RIMM solved the issue of content producers wanting to be paid for their content.

  • Report this Comment On August 10, 2011, at 10:03 PM, woodapple wrote:

    What a joy to find such clear tihinkng. Thanks for posting! Haha. I woke up down today. You've chereed me up! if you need a Swissgear backpack, try: http://www.backpackunion.com

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