The Downfall and Demise of RIM

By webadmin on 10:23 am Jul 25, 2012
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Alden Hartopo

Nearly 3 years ago was the first time I purchased a BlackBerry smartphone, a move that has actively affected my means of communication via the BlackBerry Messenger, push mail and convenient mobile access to social media networks. At that time these smartphones had rapidly becoming a popular item in the global market and by 2011 it was responsible for 43 percent of smartphone sales in Indonesia – nicknaming our beloved archipelago as the “BlackBerry Nation.” On a greater scale in 2009, the BlackBerry dominated 50 percent of the smartphone market along with 20 percent of the global mobile market. Yet in a surprising twist, that number would spiral down to a shocking 6.4 percent in early 2012. So, what led to the downfall of this once popular gadget?
 
Once operating at the center of the telecommunications market, Research in Motion developed a foundational aspect of the enterprise establishment known to many of us as the BlackBerry. Fulfilling the mobile needs of businesses in a world increasingly dependent on the Internet, the BlackBerry smartphones became the prestigious symbol of the eminent aptitude and influence encompassed by the professionalism of the corporate world. Additionally the development and security of both the BlackBerry Messenger and the BlackBerry Enterprise Server undeniably attracted the needs of corporate users. Unfortunately, RIM failed to foresee the emergence of BYOD (Bring Your Own Device) to work, where employees, instead of CIOs, became responsible for bringing their own choice of mobile device for work. Enterprise employees were more attracted to combining both business and pleasure in a single smartphone, a move that RIM failed to capitalize on. On the other hand, this rapid change was successfully uncovered and seized by tech giants Apple through iPhones and Google’s Android-based operating systems; both devices that boast a large application base along with hardware that far outclass the BlackBerry.
 
The gradual downfall of RIM’s BlackBerry since peaking in 2009 is truthfully a tragic end to a device that once not only held much potential but was regarded by many to be a vital component in their daily lives. It has evolved from merely a tool to a way of life and a necessary ingredient for virtual communication. Yet its failure today can be blamed not merely on the rise of its rivals but the failure to properly recognize and rally to the changes involved in consumer demand.

Farhad Manjoo of Slate Magazine justly pointed out the underlying reason for their failure, saying “RIM’s original sin was its decision to create technology that satisfied corporate IT departments rather than regular people.”
 
Such words cannot be more accurate as the company lacks a solid application base compared to Apple and Androids hefty app stores. As earlier stated, RIM did not adapt to a changing tide of smartphone usage where consumers want both fun and work to reside in their devices which has led to corporate IT department seeking to fulfill the needs of its employees. As its consumer base drastically declined, the company attempted to recover from its shortfall through releasing touchscreen phones while attempting to widen its application store all of which has not succeeded in rivaling the high class components of its competitors. ”BYOD has broken the one-size-fits-all model of BlackBerry and opened up more flexibility,” states Christian Kane, an analyst with Forrester Research.
 
Experiencing a fall from grace, RIM has suffered significant financial decline dropping from a share price of $149.90 in 2008 to $7.88 today. Only recently the company announced its first loss in 8 years with its first quarterly report depicting a $518 million loss in addition to cutting back 5,000 of its 16,500 employees. This arrives as its revenue falls 43 percent from $4.9 billion to $2.8 billion with Morgan Stanley downgrading its stock in response to increasing challenges for the company. Its high losses have also led to the delaying of their new line of BlackBerry 10 smartphones until early 2013, a move that can prove disastrous as Apple, Google and Microsoft are expected to release upgrades to their mobile platforms by the end of this year. These include the anticipated new iPhone, updates to Android phones and new Windows 8 phones. This will undoubtedly “make it extremely difficult for RIM to generate interest in its new line,” states Charles Golvin, an analyst with Forrester Research.
 
Consequently, the company has been viewed to be as “good as dead” with Jonathan Geller, founder of the Boy Genius Report going so far as to state: “The RIM we know, is dead. The company has 12 to 15 months until it’s either acquired, or broken into pieces and sold for parts. I’m not even sure why the company still plans to launch BlackBerry 10 smartphones at this point.”
 
Sadly Geller is not the only one voicing such accusations. A simple Google search of “RIM is Dead” will result in multiple articles from tech blogs and news sites that come together toward a mutual conclusion: RIM’s glory days are over as the company is already dead and should consider selling its remains.
 
Conversely, while the company has acknowledged the future will be “challenging for its business,” RIM President and CEO Thorsten Heins assured investors that he is “confident that the first BlackBerry 10 smartphones will provide a ground-breaking next generation smartphone user experience.”
 
Though success is flattening out among its consumer base in the US, RIM has begun to become dependent on the growing success in emerging economies such as Indonesia where according to the Wall Street Journal, “Four out of the five top-selling cellphones by value in Indonesia are BlackBerry models.” In response, RIM has attempted to forge a stronger relationship with its consumer base by means of local branding including the creation of a BlackBerry fan page in the Bahasa language.
 
Indonesia, however, is not the sole stout supporter of BlackBerry devices as these smartphones are highly popular in the Philippines, Thailand, Nigeria, and accounts for more than half of smartphone sales in South Africa.
 
In truth, the story behind RIM’s success in these regions point to the fact that the BlackBerry is a consumer’s first reliable access to the Internet as computers remain expensive in many of these developing nations. Moreover the integrated ability of its instant messaging software and fast browser represents a deal breaker for those who remain clueless to downloading and installing third-party apps for other smartphones.
 
According to Daryl Chiam, an analyst with the technology research company Canalys, “Emerging markets, particularly in Asia, are becoming more important markets not just for RIM, but all mobile phone vendors.” While competitors such as the Android phones have already started to solidify a consumer base throughout these regions, RIM’s present ability to capture the market for these emerging markets have suggested that one key to the company’s survival may rely in its ability to maintain and expand its presence in these countries.
 
In the meantime, blogs have been abuzz with rumors of Microsoft purchasing RIM or alternatively formulating a strategic partnership as already carried out with fellow ailing phone maker Nokia. This would essentially involve dropping the BlackBerry OS for none other than the upcoming Windows 8 OS. Such a move would ultimately place Microsoft as a serious contender in the smartphone wars.
 
Analysts have agreed to a certain fact that the company will need to start selling off its parts or its business in general. Stock market analysis site Seeking Alpha argued that “BlackBerry’s corporate security services, BlackBerry Messenger (BBM) and its native email application need to be opened up for Google’s, Android OS, Apple’s iOS, and Microsoft’s, Windows Phone 7 and 8 devices.”
 
This also includes opening the possibility of selling off its patents that are worth billions alone. Alongside its enterprise subscriber business and network operating center architecture, Michael Walkley, an analyst from Canaccord Genuity, values the company at a total of $4.25 billion.

After some time, if RIM does fail to recover and goes out of business, one hazard remains clear: the looming threat of its secure network servers going dark, a progression that will leave millions of BlackBerry users without data, without service and with a practically useless device.
 
Being a current BlackBerry user myself, the smartphone has long been the optimal tool of instant communication which has enabled immediate exchange across thousands of miles with friends and family. Nonetheless, the threat of RIM’s demise, a lack of interest in its deficient content and increasing attraction to other devices may just be enough to shift me towards its competitors and acknowledge the death of the once prestigious and prosperous BlackBerry smartphone.