R.I.P. for RIM? Not So Fast ...

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Research In Motion's (Nasdaq: RIMM  ) BlackBerry was once the smartphone of consumers' dreams. The emphasis, though, is on "once." Research In Motion has been watching its BlackBerry's market share drop sharply while overall smartphone sales have jumped like a person sitting on a tack.

Even though the company gained more than a million new BlackBerry users in the second quarter over the same period a year ago, its worldwide share of the smartphone market dropped from 19% to 12%.

The big winners in the smartphone world, as most people probably already know, are phones powered by Google's Android mobile operating system and Apple's (Nasdaq: AAPL  ) iOS, which runs its iPhone. Together they accounted for 62% of second-quarter sales, up from 31% in the same quarter last year.

As the Android and iOS combined share doubled, the BlackBerry's share almost halved. Verizon (NYSE: VZ  ) , AT&T (NYSE: T  ) , and Sprint Nextel (NYSE: S  ) are all seeing the BlackBerry fall further and further behind the much better-selling phones from Samsung, HTC, and Apple.

Not dead yet
But the reports of Research In Motion's imminent demise may be premature. I say this because there are really two kinds of people in this world: those who love their BlackBerrys, and those who don't. Can 70 million of the former be totally wrong?

So many BlackBerry users practically grew up -- at least in terms of corporate mobile communications -- hunched over their "CrackBerrys," putting their opposable thumbs to good use pushing emails through the halls of commerce and government. By now, that BlackBerry keyboard is a part of them, and changing phones would be like an amputation. I can almost hear them screaming at their IT departments: "If it's not broke, why fix it?"

The company phone
The real BlackBerry lovers, though, are those IT departments, the ones responsible for company email and data security. Even though the iPhone and the Android phones can now be made more secure with encryption and forced PIN entry, the IT professionals still think that the BlackBerry is a tougher fruit for hackers to crack. They also feel that its security features are simpler to set and deploy. A corporate IT professional told Ars Technica that "the encryption methods are better than anything anyone else has. It's the reason governments are still using them."

Even so, some businesses are adding non-BlackBerry phones to their arsenals. But those phones can add extra layers of anxiety for companies. There are worries that employees might download unapproved applications and install OS upgrades that the IT departments haven't yet tested for stability and security holes.

And there is a concern that can go beyond virus threats. Companies need to control where its email is archived. If a non-BlackBerry phone sends email up to some cloud server who-knows-where, the business loses control of its communications. And it would be difficult for a company to shut down the email of an employee who leaves. It also wouldn't be able to archive all of its emails and messages, with the implication that it couldn't meet the paper-trail obligations imposed by the Sarbanes-Oxley Act.

Stayin' alive ...
There is no question that Research In Motion's product desirability quotient has plummeted among the non-corporate set. The Android OS and the iPhone's iOS just offer a more enjoyable user experience for the general consumer than the BlackBerry does. And RIM's tablet offering, the PlayBook, just can't even come close to a tablet computer's live-or-die feature: the number of available apps.

Research In Motion still makes a living, but its operating income has been diminishing over the past three quarters. Its most recent earnings statement shows operating income at only 38% of what it was in the same quarter a year ago.

The recent multiday service outage that BlackBerry users endured was an operational and public relations nightmare. It was the worst such outage in the company's history, and it has brought a dark cloud over the company at the worst possible time.

Another slap in the face may be coming in the next few weeks as Nokia (NYSE: NOK  ) -- in a perhaps last-gasp attempt to catch the smartphone whirlwind -- releases its latest smartphone. It will use Microsoft's (Nasdaq: MSFT  ) Windows Phone OS. We'll have to wait a bit to see what effect that event will have on the smartphone market.

Even so, the BlackBerry is a product that is adored by a not-insignificant-sized or influential group. But let's face it: The release of a new BlackBerry model does not incite blocks-long lines or seduce consumers into camping on the sidewalk in front of the RIM store.

So perhaps Research In Motion should just embrace what it is and what it does better than the other smartphone companies -- provide business and government with the products they need -- and leave the games, social media, and other consumer features to those companies more familiar with the general marketplace. That may be the best way to keep the Grim Reaper at bay.

Before I'd invest in RIM, I'd want to see how it reacts to its hemorrhaging market share. There is a company, though, that could be worth considering. It's what the Motley Fool Stock Advisor newsletter service considers The Motley Fool's Top Stock for 2011.

Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Microsoft and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, AT&T, and Apple, as well as creating bull call spreads position in Microsoft and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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 (6) | Recommend This Article (5)

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  • Report this Comment On October 26, 2011, at 10:50 PM, Jbojacket wrote:

    The ONLY reason I still have my blackberry is because I'm not eligible to upgrade. Until recently, my company has required blackberry, now the executive team has moved to iPhone. I'll follow ASAP. The apps, the lack of outage, the ease of use...the only advantage RIM has is the keyboard. I can get past that.

  • Report this Comment On October 27, 2011, at 5:57 AM, marv08 wrote:

    "So perhaps Research In Motion should just embrace what it is and what it does better than the other smartphone companies -- provide business and government with the products they need..."

    Well, not that easy as it sounds. If I look into our parliament (the German one), iPhones outnumber BBs by far, and most companies I work with have BYO programs now (they reimburse a part of the cost of privately owned phones used for business) and with few exceptions everybody chooses iPhones or Android phones (mainly the Galaxy). RIM is not even an also-ran.

    iOS and Android have caught up quite a lot in MS Exchange support (actually the iPhones can do a few things even BBs can't in this regard), great email is no longer a standout feature, and there are secure email solutions for iOS and Android devices from third parties that are equally secure as RIM's and don't rely on third party servers to be up and running.

    The real killer (and why it is RIP for RIM indeed) was yesterday's announcement, that the PlayBook software update is delayed from now to February 2012, and that BBM has been scrapped from it! The next generation of BBs will use the same OS as the Playbook. If BBM for the tablet is not achievable, then the new BBX phones will not have not either. And free messaging was a major selling point for most, if not all, non-business buyers.

    No matter how good QNX/BBX might be (I can't say, as it is not ready), it is 24 months too late already and it is obvious that they can't even predict development times with any amount of reliability. They are royally screwed.

  • Report this Comment On October 27, 2011, at 7:36 AM, lucasmonger wrote:

    I jettisoned my blackberry when the iPhone 1 came out even though my company didn't support the iPhone in their servers. The surprising thing is that I really don't miss being tethered to company email. I carried both for about a month and found the blackberry to be excruciatingly frustrating to use next to the new (at the time) iPhone. I kept trying to touch the screen and the blackberry wouldnt do anything because it didnt have a touch screen. Alas, I'm beginning to wonder why people are still categorizing Blackberries as smartphones when they really aren't all that smart... Sure, they're smarter than dumb phones (feature phones) but that's all they have going for it. If they were to create a new category for Blackberries (something between smart and dumb phones) then RIM would dominate that category and maybe not feel so pressured by the press to change to what's not in their DNA.

  • Report this Comment On October 27, 2011, at 10:49 AM, etgh wrote:

    What people tend to forget is that RIM's number of BBM users is growing and they are still profitable. For example, over the past 12 months, the BBM user base grew from 50 to 70 millions users. The company is being hounded out of the market for not capitalizing on the consumer take-up of smart phones, but it was never their key market.

    Consumers are currently in love with the child-like user experience and have come to expect that of all communication devices. However, RIM products are for adults who are serious about communications and business productivity. No one should be shocked that corporations have been and continue to be stanch users of RIM products.

    There is a steady trickle of users returning to the Blackberry platform, reportedly because of fatigue with the entertainment devices plus the current crop of BB07 devices can compete any device on the market.

    I went to Disneyland too and had a great time, but then I came home and went back to work.

  • Report this Comment On October 27, 2011, at 11:26 AM, techfrk68 wrote:

    I have to agree with etgh's comments about toys and blackberries. I used the iPhone for a week before I gave it to my daughter. In the 5months that she had it it needed to be replaced twice. The second time because of exposure to humidity. Had to go find the only location in Singapore that would replace it. The cost $1500 in all for both occassions combined. I finally gave her a blackberry. She has been using it for the last 15+months and recently had a problem with the keyboard. Took it to the neighbourhood shop - repair cost $35. So I am of the firm opinion that the i in the apple family of products is for the idiots who end up buying it and feel good about higher data charges and lower efficiencies. Because if you want to type out a proper e-mail on a touchscreen - good luck to you! I do not see myself replacing the blackberry with an iPhone till it has a blackberry like keyboard. Call me old fashioned or simply a grown up!

  • Report this Comment On November 12, 2011, at 6:32 PM, maxmz05 wrote:

    low efficient company,

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