Will Research In Motion Innovate or Die?

"Once we rid ourselves of traditional thinking, we can get on with creating the future."
-- James Bertrand

Running a business is all about innovation. Whether you're a biotech upstart, a cutting-edge technology company, or a large-scale retailer, innovation is paramount to a business' success. Without innovation, companies run the risk of complacency and getting passed by competitors, or, even worse, folding up shop altogether like Circuit City did a couple of years ago.

No company gets a free pass when it comes to adapting its business plan -- so when push comes to shove, we need to ask ourselves: Will this company innovate or die?

Today, let's take a closer look at Research In Motion (Nasdaq: RIMM  ) to determine if the company can adapt to rapidly changing consumer demands or if it will be pushed into the background.

What's wrong with RIM?
The primary problem with RIM is that it's sitting on its laurels, complacent with its product and its position in the smartphone arena while its competitors -- Apple (Nasdaq: AAPL  ) , Samsung, and Motorola Mobility (NYSE: MMI  ) -- are innovating and changing the way consumers use their phones.

RIM has been slow to adapt its BlackBerry platform to a quickly changing consumer market that relies on its phones to do more than simply secure emails nowadays. After focusing for so long on the enterprise market, RIM appears to be a deer frozen in the headlights as it tries to bring new and hip products to consumers. Based on a first-quarter analysis of smartphone market share from ComScore last month, Google's (NYSE: GOOG  ) Android operating system swept RIM under the rug to gain the top spot, with Apple also gaining ground.

Getting RIM back on track
I'm not the CEO of RIM, but for a moment let's pretend I am. As I see it, RIM needs to do three things to get its business back on track:

  • Pick a target audience: Please! On behalf of shareholders, pick a target audience! If you're going to keep those archaic keyboards on your phones, continue targeting enterprise customers and stop trying to beat Apple on its own playground.
  • Innovate faster than molasses in winter: One of the biggest drawbacks of RIM has been its speed of innovation. In general the company is usually on the tail-end of new designs – see the BlackBerry PlayBook as evidence of this. In order to maintain its status as a major player in the smartphone market, it will need to listen to its customers and adapt quicker.
  • Test the waters: RIM is a cash cow despite its recent problems and it should test the waters about potential joint ventures within its sector, or perhaps even putting itself up for sale. RIM has taken a rather standoffish approach to spreading its wings and shareholders would be best served if RIM took a few chances rather than sitting back and playing it safe.

What's the verdict?
Many have claimed that RIM is going to go the way of Palm and be a distant memory in just a few short years. Unlike Palm, RIM is still in a pivotal, industry-changing position, thanks to the 27.1% market share it still holds with smartphone subs. The company certainly isn't going to win over customers by being complacent, and it will definitely need its enterprise clientele to remain strong if it is to continue raking in the cash as it has been for the past few years. Based on its strong balance sheet and minute forward P/E ratio (5.35!), I still feel the company has a good chance of becoming what Apple was in the 1990s -- a successful turnaround story.

Are you buying into the potential for a RIM turnaround? Share your ideas in the comments section below and consider adding Research In Motion, Apple, and Motorola Mobility to your Watchlist to keep up on the latest news in the rapidly changing mobile sector.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google and Apple, as well as 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 that has a built-in easy button.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 14, 2011, at 3:22 PM, openhandedgrouse wrote:

    I am far from an expert on rim or smartphones. IMHO I believe to Rimm is ovesold in the short term. I bought options at 40 and than 36 hoping for a bounce and sold them both. Near term I think 35.50 to 36 is the current bottom as it has bounced from those levels before.

    Having said that I only know one person that owns a rim phone and they told me they want an i-phone. IMO the problem for rim is not the devices they offer. As they have nice phones with the option of a touch screen or keyboard. Their problem is their lack of infrastructure. Apples infrastructure makes it very easy to buy an I-phone and blam-ooo you have a billion apps at your fingertips. A person can personalize their phone by selecting the apps/music that apply to them.

    As an aside, I thought Apple might lose some market share when Amazon went to the cloud but then Apple strikes back with the I-cloud...Blam-ooo!

    Rimm can't compete with Apple in the smart phone arena. IMO no one who has the choice would pay the same for a rim phone as an I-phone. In other words rim will have to sell their phones at a large discount ($150 cheaper) than any apple as long as the have the applinfrasturturadvantage. Also, apple makes $$$ both on the phone and the app/music store. Apple is also currently at a fair value with a foward PE of 11+. If I was going to buy either I would wait until late july. If Apple's stock goes up in sept-jan rimm may go up during the same time in sympathy. What do you think?

  • Report this Comment On June 14, 2011, at 4:06 PM, 1caflash wrote:

    I agree with many of the previous comments. Perhaps RIMM should Give a Playbook to President Obama and let His DAUGHTERS USE IT; then RIMM could UPDATE its device and call it "THE PRESIDENTIAL PLAYBOOK"! Maybe THE FIRST LADY will also USE ONE. RIMM should have ITS TWO HEADS EXAMINED! Having TWO CEO's is like a Phone containing 2,000 APPS and You Pay for Each ONE when You Only Use a Few: like 200 Channels when You Watch 20! YOU KNOW I'm a Frustrated Shareholder!! Get with it, RIMM. Get Your Co-CEO's Faces out of Dark Places and INNOVATE!!!

  • Report this Comment On June 14, 2011, at 4:08 PM, deemery wrote:

    Given the performance of RIMM's co-CEOs and the strategy here, maybe they should hire Sean. But they better do something Right Now! I think they have until the end of the year to get onto a strong track with targeted/focused products that show real value in their selected markets.

    That being said, I'd by AAPL before RIMM, even if they were trading at equivalent P/E ratios, etc. RIMM's a long shot; APPL is not a sure thing, but is as solid as they come right now in IT tech companies.

  • Report this Comment On June 15, 2011, at 4:24 PM, scottinindy wrote:

    There are literally millions of people who would switch to an I-Phone or comparable Android if they were not shackled by their corporate IT markets. I have scores of employees who ask EVERY day when we will switch away from the decade-old Blackberry technology.

    Blackberries - have inferior memory, inferior screens, inferior processors, inferior applications, etc, etc, etc.

    These guys are dead in the water. They will milk money for a decade from their enterprise agreements and then die.

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