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.
