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RIM: Is the Party Over?

In the tech world, coming late to the party can have near-fatal consequences for even the biggest names in the industry. Consumers and Wall Street no longer have time and patience for companies that stop innovating, lag too far behind market leaders, or have little ability to quickly correct course.

The consequences of multiple missteps are already playing out at {complink 3847|Nokia Corp.}, the world’s largest handset manufacturer. The other day, Bolaji Ojo wrote about how the OEM has spiraled into something far beyond a funk. (See: The Nokia Era Is Over.)

The same thing is now coming around to {complink 4644|Research In Motion Ltd. (RIM)}, a top-tier OEM that gained fame for its BlackBerry phones but now is seriously faltering. Throughout the business press this week, experts are speculating about the future of this troubled stalwart. And, it doesn’t look at all good.

Analysts are calling for a change in executive management; some have lowered expectations; and some have even dropped coverage. RIM's stock value has tumbled, and there's even talk of shareholder activism to push the company toward a sale or some other big-time shake-up.

If you’re following what's happening in the evolving smartphone and tablet markets, you won't be too surprised to hear why RIM is the latest OEM getting sucker-punched. The competitive market factors are written on the wall in plain view. They include:

  1. Consumers want innovative products that match — never mind beat — what Apple already has delivered via its iPhone and iPad.
  2. Investors expect companies to come up with credible, competitive products that will reap higher revenues and bigger market share.
  3. Everyone expects pricing to be in line with other devices, particularly the aggressive Android platforms winning consumers in Europe and Asia.
  4. Operating system functionality will be a make-or-break factor when it comes to winning any sort of accolades.

Even as RIM brings new products to market, including the BlackBerry Bold smartphone and the PlayBook tablet, analysts aren't convinced those products will be innovative enough to keep the company swimming.

Rodman & Renshaw analyst Ashok Kumar, in his recent farewell research note on RIM, said the company needs a “quantum leap” to catch up, according to a post in The Deal, titled “RIM teeters on the edge of obsolescence.” And Charter Equity analyst Ed Snyder has been quoted as saying that co-CEOs Jim Balsillie and Mike Lazaridis have taken the company as far as they can, are stuck in the past, and don't have new ideas. Ouch!

It's fair to say I’m cynical about the possible toppling of yet another big-name tech company. This scenario has become fairly common, and maybe RIM, Nokia, and others have gotten what's coming to them. Play ball and develop something people want, or move over and let someone else step up. Resting on your laurels is so 20th Century. What have you done lately? That’s what I keep asking.

That said, I do clearly see the other side of the coin. While the industry thrives on the idea of innovating, producing, and delivering the next must-have gizmo, the actual work it takes to meet this goal is much harder than it looks. Engineering, supply chain, product marketing, executive direction, and a host of other function areas have to work together like a well oiled machine to bring any winning platform and form factor to market.

If we all know that, why do we keep hearing about companies falling off the map? Is it just a question of survival of the fittest, or are there deeper problems in the industry that no one wants to talk about and fix in a meaningful way?

12 comments on “RIM: Is the Party Over?

  1. FLYINGSCOT
    June 6, 2011

    I enjoyed reading your article and believe it does reflect reality.  We supply RIM and over the last 2 or 3 years it does seem like RIM is not as vigorous as it used to be.  Certainly Apple and a slew of Asian handset OEM manufacturers seem to be getting more airtime than RIM these days.

  2. DataCrunch
    June 6, 2011

    RIM mobile devices are still strong among corporate users and I expect they may remain strong for quite some time.  A number of reasons for this are:   1.) They already have a grip in the enterprise with their BlackBerry Enterprise Server (BES), which is IT friendly; 2.) With the constant concern of mobile security and data breach, the BES platform provides an IT-friendly environment allowing to enforce corporate policies and security measures to their enterprise-wide mobile workforce; 3.) Until, another alternative to BES by the other mobile players, BlackBerry’s will still be the device of choice for many large corporations.

  3. Taimoor Zubar
    June 6, 2011

    RIMS recently announced the release of new BB OS 7 which would not be supported on old models. I think that's another stupid move. If RIMS really want to retain it's existing customers, it cannot afford to make moves like this which may force customers to switch to other competitors.

  4. Jennifer Baljko
    June 6, 2011

    Thanks, all, for the insights.

    To confuse matters even further, here's a piece of news that fell into my email inbox five minutes ago. It's going in the “this gets stranger every time I think about it” folder:

    RIM ranks in Gartner's annual Supply Chain Top 25 … it's listed at one of the top 5, along with Apple, Dell, P&G and Amazon!

    According to Gartner, “By identifying the leaders — that is, companies that are pushing the envelope of supply chain innovation — we hope to consistently highlight the best practices from which others can learn, thereby raising the bar for the supply chain profession as a whole.” http://www.gartner.com/DisplayDocument?doc_cd=213740&ref=ftmnl

    Let's see how the dice fall here. If I was a betting woman, I would play the odds that something doesn't seem quite right here. Guess we'll follow the money and see what the numbers look like during earnings season.

     

  5. Wale Bakare
    June 6, 2011

    @Dave Sasson i deeply share from your add-ons. In market of smartphones – corporate users are much more concern about security of mobile devices. While larger percentage of other users obsessed with features like texting, chating and gaming as well as emailing. 

  6. FLYINGSCOT
    June 7, 2011

    The Gartner ranking formula is:

    Composite Score: (peer opinion * 25%) + (Gartner opinion*25%) + (ROA*25%) + (inventory turns * 15%) + (revenue growth * 10%)

    so 50% is based on opinion and 50% based on the usual investor metrics.  RIM has historically managed its assets well so ranks well there.  However inventory turns are no where near Dell and Apple.

  7. Ms. Daisy
    June 7, 2011

    The story of RIM is that of the statement “You Snooze, You Loose”. Any company that stops innovating is a dead one!

  8. stochastic excursion
    June 8, 2011

    I think the sluggish market positioning is due in part to a crisis in leadership.  RIM has had a tough regulatory terrain to cover: http://en.wikipedia.org/wiki/Research_In_Motion#RIM_stock_option_scandal_settlement

  9. Ms. Daisy
    June 8, 2011

    Stochastic;

    The numerous litigations brought against RIM and the counter litigation excercised by RIM and its co-CEOs understandbly added to the company's decline, because of the diversion created by all the law suits. But the bottom line is the company is no longer at its height of innovation and therefore paying for the consequences.

  10. stochastic excursion
    June 8, 2011

    It's true that Apple has seized the initiative as far as innovation.  A strong product push is an important motivating factor for designers, and that seems to be missing at RIM.

  11. t.alex
    June 10, 2011

    I myself find RIM devices a little more user-friendly than Nokia's. Is RIM following Nokia footsteps by partnering with some OS vendor soon? Perhaps Android.

  12. NTP
    December 20, 2011

    Here's an interesting perspective on what COULD be next for RIM: http://www.element14.com/community/docs/DOC-39710

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