Can RIM Make A Comeback?4:05 PM EST Mon. Oct. 01, 2012
BlackBerry maker Research In Motion, once the gold standard in the mobile market, today would be happy just to make the podium.
"We have a clear shot at being the No. 3 platform in the market," said CEO Thorsten Heins during a press conference at last week's BlackBerry Jam conference in San Jose, Calif., according to a report from CNet. "Carriers want other platforms. And we're not just another open platform running on another system. We're BlackBerry."
In the second quarter of 2012, RIM held just 5.2 percent of the worldwide smartphone market, down from 18 percent two years prior, according to Gartner. Android was at the top of the market with a 64 percent share in the second quarter, with Apple's iOS in the runner-up spot at 19 percent of the market and Symbian in third with a 5.9 percent share.
Getting to the bronze-medal position behind Google Android and Apple's iPhone could be considered a step in a larger comeback for Waterloo, Ontario-based RIM, and the market holds a range of opinions as to whether the company can make it back to a position of prominence.
RIM's recent change in governance -- the installation of Heins as CEO and the naming of a new board chair following the ouster earlier this year of co-CEOs and co-chairmen Mike Lazaridis and Jim Balsillie -- is viewed by many as the company's first step toward resurrection. The concentration of so much power in the hands of the company's two top executives had become a lightning rod for disgruntled shareholders and employees (see "An Inside Look At Where RIM Went So Wrong"). Amid mounting pressure, the board finally made the move to separate the two roles in January.
Some RIM-watchers felt the change fell short. Although the dismantling of the dual-CEO and chairman model drew forth some sighs of relief, Heins, who joined RIM in 2007, wasn't exactly the fresh blood many thought the company needed to save itself. Instead, he had been long-entrenched in the company's corporate culture and strategic design.
"[Heins] comes from the inside, and he was groomed within this culture, and I find it difficult to think that he would be able to make any kind of drastic turnaround in terms of the direction or the way they are marketing or positioning themselves," said Tuong Nguyen, an analyst at Gartner.
Shareholders such as Jaguar Financials were somewhat relieved to see a change, but still felt that many of their requests were only met halfway, particularly given that Balsillie retained a seat on the board.
"We're at least pleased with the step that has been taken," said Vic Alboini, CEO of Jaguar Financials, in response to the Jan. 30 announcement. "However, now the opportunity is to revamp the board and to add some new, more experienced directors, particular in the technology space."
Balsillie's resignation came to pass three months later. As RIM in March disclosed fourth-quarter financial results (a loss of $125 million and revenue of $4.2 billion, down 25 percent compared to year-ago results), it also disclosed that Balsillie, after serving nearly two decades as the backbone of RIM, was severing his ties with the company completely.
Albioni spoke with CRN after Balsillie's resignation was announced and said that, while he long anticipated the move, it was a relief to finally see it come to fruition. "We have to have a break from the history and the legacy [of RIM]," he said. And the ousting of Balsillie was a step in that direction.
THE WAR OF PERCEPTION
In addition to revising its traditional governance model, many point to an overhaul in RIM's marketing efforts as a potential game-changer for the struggling BlackBerry brand. RIM's ability to speak more loudly to the consumer market -- rather than its traditional enterprise buyers -- will be especially telling of its future.
"We understand the challenges RIM faces in today's extremely competitive and rapidly changing market. We are committed to building a successful future, which takes full advantage of all of the lessons we have learned along the journey," said Robin Beinfait, CIO of RIM, in a statement emailed to CRN. "RIM takes nothing for granted. The needs and aspirations of our customers around the world are very important to us, and we remain dedicated to continuing to refine our customer experience. We are confident that the changes we are making now will put RIM on a strong path going forward, as we move into the next chapter of mobile computing with BlackBerry 10." (For more of Beinfait's response to CRN's questions, see "RIM Responds: Changes Will Put Company On Strong Path")
Much of RIM's battle isn't a major overhaul of its products -- it's simply convincing its customers that it's not going anywhere, and that, despite all the missed financial benchmarks and highly profiled management shuffles, the BlackBerry is here to stay.
David Felton, RIM partner and owner of Norwalk, Conn.-based solution provider Canaan Technologies, gets "a lot" of inquiries from clients as to whether they should stick with their BlackBerrys, but those questions are rarely, if ever, fueled by technical dissatisfaction. They are fueled, instead, by RIM's recent mishaps, which have for months made headlines of tech publications around the globe. For enterprise users, Felton still believes in the BlackBerry's legacy as a secure and reliable device. In fact, he said he has "yet to hear an actual complaint [from a client] that an Android or iPhone will cure."
"Ninety-nine percent [of the time], it's change for the sake of change because BlackBerry has the appearance of being a dead product in the eyes of the buyer," Felton said of his clients who trade in their BlackBerrys for an Android or iOS device.
It definitely has that appearance to Jason Charnov, systems administrator at Arrow Container Corporation, an Indianapolis-based manufacturer of corrugated containers and cartons. Arrow Container, a longtime user of the BlackBerry Enterprise Server and BlackBerry devices, particularly for its sales team, is now transitioning away from its roots. BlackBerrys are being swapped out for Android devices, and the BlackBerry Enterprise Server is being replaced with Enterproid's Divide platform for mobile device management.
Part of the reason for the shift, Charnov said, was Arrow Container catching wind of RIM's management troubles. "When you start seeing announcements of some of their [RIM's] technical heads leaving, and when you see the engineers leaving a company, that's time to get worried, that's usually a red flag for an IT guy," he told CRN. "And then when you see the CEOs [leave]… their whole model, it's not something they can easily fix."
The growing ability of consumers to drive corporate mobile trends and determine a tech company's success is what contributed to the BlackBerry's decline, Felton said.
"[RIM] should have learned the lesson that BYOD is what killed their devices," Felton told CRN. Instead of continuing to focus on its traditional corporate subscriber base, RIM should talk to consumers, find out what it is they don't like about their phones today, and a build a new product that specifically meets those needs.
"Don't talk to the guy in a suit," Felton said, as a message to RIM. "Talk to the consumer."
Gartner's Nguyen told CRN that RIM finding its voice is critical to its revival. The company, he said, traditionally has lacked the sort of in-your-face, ubiquitous marketing approaches that competitors such as Apple tend to employ. In the end, this reserve can hurt your sales.
"Everyone's job within a company, and especially the CEO's, is to be the evangelist, the marketer for the company -- to say, 'Hey, look, here's something we do really great, and here's why,'" Nguyen said.
Upon his appointment as CEO in January, Heins initially said he planned "no seismic changes" for RIM -- a statement that brought on a wave of criticism from analysts and partners alike. But during his first earnings call as RIM CEO three months later, the new face of BlackBerry seemed to have had a change of heart, outlining publicly a series of changes he planned to implement over the next year. A stronger marketing strategy topped his list.
"The impression I had after two days as CEO is very different from the impression -- not the impression, the facts -- I discovered after being here for 10 weeks as CEO," he said during the call. "I am convinced that substantial change is what we need."
He noted the toll the BYOD trend was taking on RIM's sales, as more and more of its traditional enterprise users trade in their BlackBerrys for Android devices and iPhones. A more consumer-oriented strategy is in the works at RIM, Heins said, but first and foremost the company will continue to focus on its core areas of strength, namely, security and email reliability.
To some RIM observers, this announcement was a red flag. It suggested RIM didn't fully grasp the market, and was underestimating just how widespread the BYOD trend was becoming. To others, it made perfect sense: RIM should focus on what it does well, remind us how it become so iconic in the first place, and rely on partnerships to fill in the remaining, consumer-oriented gaps.
"They have lost that battle to Apple and Android, and they won't get it back," Jaguar Financials' Albioni told CRN. "I think they need to concentrate on their strengths."
IT'S ALL ABOUT THE APPS
A revamped marketing strategy isn't the only thing RIM should bank on for revival -- apps play a big part, too. A device's "application ecosystem," or the breadth of its app offering, has become more important to mobile users than the hardware itself. And according to statistics from Web-based application search portal Mobilewalla, the BlackBerry app ecosystem is less than half the size of those supported by main foes Apple and Google.
As of July 2012, Apple's iOS touted the largest app ecosystem with nearly 618,000 options for download. Google Android was next with more than 374,000 apps. RIM trailed with nearly 149,000.
RIM has been trying to bulk up its app offering by onboarding new developers and convincing its current ones to stay. At its BlackBerry DevCon Europe event in February, RIM attempted to do this by telling a crowd of developers, quite simply, that they will make more money developing for BlackBerry than they would for Apple or Google. Heins said 13 percent of all BlackBerry developers have made more than $100,000 through their contributions to BlackBerry App World, which is "more than from any iPhone or Android application."
Financial incentives aside, it's clear RIM needs to bulk up its app offerings if it ever hopes to re-establish itself as a competitive mobile player. And by the looks of its upcoming BlackBerry 10 OS release, the company is not only aware of this, but adopting a "if-you-can-beat-'em-join-'em" approach – a move that's already being praised by partners.
RIM's BlackBerry 10 OS, which will be released sometime during the first quarter of 2013, will host an Android app player that allows users to download and play Android applications on their BlackBerry smartphones. The same concept was applied to RIM's new PlayBook tablet OS, BlackBerry PlayBook OS 2.0, upon its release in February, but the company did not specify exactly how many Android apps would be accessible for download.
"Only Android applications that have been ported over to the BlackBerry PlayBook platform, and submitted and approved for BlackBerry App World, will work on the PlayBook," RIM spokesperson Jamie Ernst told CRN on the day of the launch. "We aren't breaking out the specific numbers for Android applications that have been ported over to the PlayBook platform."
In order for Android apps to work on BlackBerry 10 or PlayBook OS 2.0, developers need to convert or "repackage" them before they can be ported to the new platforms. RIM has tools available on its website today to help Google's developer community make the leap.
Partners agreed that the inclusion of third-party apps is a good move for RIM. "I think the best thing they [RIM] can possibly do is get apps, Android apps, running on the BlackBerry," Felton said. It's tough to attract new developers to build apps for what's perceived to be a "dying product," he explained, so the overlay of existing Android apps on top of BlackBerry's OS is a smarter bet.
That said, BlackBerry 10 was originally slated to launch later this year, but after finding development of the new OS to be more "challenging and time-consuming" than expected, RIM in June delayed the launch until the first quarter of next year. Just as RIM saw with the delay of PlayBook OS 2.0, the next-gen software platform for its BlackBerry PlayBook tablet, this could cause customers who were waiting for the new OS to grow impatient, Felton told CRN, and decide to jump ship to Android or iOS devices before BlackBerry 10 even arrives.
MOBILE DEVICE MANAGEMENT FOR ALL
Just as it has with apps, RIM has made an admission that it's not the only horse in the race when it comes to its traditional enterprise client base. A longtime staple in corporate security, RIM's newest mobile device management (MDM) solution, BlackBerry Mobile Fusion, not only allows IT departments to manage BlackBerry devices, but iOS and Android ones as well.
Mobile Fusion, which launched in early April, delivers a centralized Web-based console to monitor and manage both company- and employee-owned mobile devices being used in the enterprise. It can support multiple devices (smartphones and tablets) per user, and can be scaled to accommodate up to 10,000 users. Specific capabilities include configuration management, security and policy definition management, user- and group-based administration, and application and software management.
The MDM platform also includes BlackBerry Balance technology that allows for the separate hosting of personal and corporate data on a single device. If the device is lost or stolen, specific log-in credentials are required to view the corporate piece, ensuring it doesn't fall into the hands of unauthorized users.
Robby Hill, owner of HillSouth, a RIM partner and solution provider based out of Florence, S.C., views BlackBerry Mobile Fusion as a step in the right direction for RIM -- and one that could possibly define its future.
"I am really excited about the Mobile Fusion suite," Hill told CRN. "I think that's a product that they needed desperately." He said that HillSouth will definitely "check out" the new platform and, if all goes well, position it as a solution able to ease its customers' MDM headaches.
"If RIM makes that product right, and customers like it, that could be their future -- being the bridge between all those disparate devices," he said.
Rick Jordan, director of sales and strategic alliances at Tenet Computer Group, a Toronto-based solution provider and RIM partner, agreed that the Mobile Fusion product was a good move for RIM and one that will well-serve its traditional enterprise client base. What's more, he said, it's an indicator that the company is aware of and reacting to the reality of the BYOD trend.
"The way I look at it is that they [RIM] are unmatched when it comes to the functionality of the BlackBerry Enterprise Server and the capabilities it does provide, but now with Mobile Fusion and the added mobile device management capabilities for iOS and Android, I think it's going to really help them," Jordan told CRN. "Obviously, they are acknowledging that there is an influx in these [Android and iOS] devices so, for them, I think it was a much-needed move."
Like Hill, Jordan believes much of RIM's future could be shaped by Fusion. Mobile device management could eventually become RIM's primary market.
"I think RIM, their objective, is to be the No. 1 mobile device management vendor globally," he said. "And I think it will take them a couple of months, but I think that's their objective based on the rollout of Mobile Fusion."
RIM FOR SALE?
Another option that appears to be on the table for RIM is a sale. During the call with financial analysts in March, Heins said he is staging a major structural, operational and strategic internal review at RIM, throughout which "no stone will be left unturned." When asked if a potential sale of the company would be considered, Heins didn't dismiss the idea completely.
"If there is any element we detect during the strategic review, we would consider [selling the company]," he said. "But it's not the main direction we are pursuing right now."
In May, Heins took this strategic review one step further, on-boarding analysts from J.P. Morgan and RBC Capital Markets to start weighing its options for financial relief. Shortly after, reports surfaced suggesting RIM was considering a split that would separate its services division and its hardware division into two distinct units. A potential sale of its hardware unit has also been rumored.
Companies ranging from Microsoft to Nokia have been rumored as potential RIM-buyers. According to Albioni, a sale wouldn't necessarily be a bad thing. In fact, it may be the company's best bet.
"It's about time that we focus on all strategic options to be examined," he told CRN, explaining that Heins' hint at the possibility of a sale resonated "very well" with him as a RIM investor.
Albioni would like to see RIM divide its business into three distinct areas -- handsets, patent portfolios and services -- and line up strategic partners (or potential buyers) for each. He pointed to the richness of RIM's patent portfolio, especially after it pooled a whopping $4.5 billion alongside Apple and Google last July to buy patents from Nortel, a Canadian telcom company. The patents included reference designs for 3G and 4G wireless networking, optics, voice processing, semiconductors and more.
"I think this is just a huge opportunity," Albioni said of RIM's potential sale.
It's also an opportunity that even the Canadian government is backing. The country's Finance Minister, Jim Flaherty, said in early April that the government wouldn't stand in the way of a foreign company taking over RIM, despite an earlier statement made by Canadian Prime Minister Stephen Harper that it would.
After Heins' call with RIM financial analysts, when the new CEO hinted that a sale could be in the cards, Flaherty responded positively.
"RIM will be the master of its own destiny," he said.
REACTION TO HEINS' PLANS
It's too soon to gauge the outcome of Heins' new strategy for RIM. Heins said during the company's second-quarter earnings call on Sept. 27 that RIM is on track to glean $1 billion in cost savings by the end of its fiscal year, an initiative that was first announced in June. These cost savings are being accrued through a wave of layoffs that will span the rest of RIM's fiscal year, and ultimately eliminate nearly 5,000 jobs from the company.
"It is difficult for the company to go through some of the decisions we had to make, but these things are essential as the company completes the transition to BlackBerry 10," Heins said during RIM's second-quarter earnings call. "We are in the midst of building a leaner and stronger organization."
Heins has held true to his promise of revamping RIM's marketing efforts, hiring Frank Boulben, former executive vice president of strategy, marketing and sales at wireless networking vendor LightSquared, as the company's new CMO. Boulben, who Heins described as possessing "a keen understanding of the emerging trends in mobile communications and computing," will be tasked, among other things, with generating interest in RIM's upcoming mobile software BlackBerry 10.
Heins has received some praise from RIM investors for his efforts.
"The good news that came out of this was that we at least have a CEO that is speaking freshly and honestly," Albioni said of RIM's March announcement that it had again missed its quarterly financial projections. He was relieved to not only hear that a sale of the company wasn't entirely out of the running, but that Heins was openly expressing concern about the company's future. Put simply, he wasn't sugarcoating anything.
Tenet's Jordan also reacted positively to Heins' new plan. He agreed especially with the CEO's decision to refocus marketing efforts on the enterprise, a market segment that traditionally served as the bread and butter of RIM. While some partners argue that establishing a hold on the consumer market is crucial for RIM's growth, Jordan believes the company will be better served by staying committed to its enterprise heritage.
"With Mobile Fusion and their re-embracement of the enterprise space, I think it's a good thing," Jordan said of RIM. "It's something they should always stay focused on -- what they did really well, and that was the government, the enterprise, security. They were trying to go after a market obviously for the numbers and were trying to compete with Apple in the consumer space but, as a partner, we were always kind of questioning that."
Jordan agrees with Heins' emphasis on the enterprise market because he has seen, first-hand, clients who have remained loyal to the BlackBerry brand. And this loyalty, he said, almost always stems from RIM's long-standing reputation in the enterprise.
"We've definitely seen a lot resistance, but we've got a lot of clients that stay with [RIM]," Jordan said. "Even though there are a lot RIM bashers out there, there are a lot of people that are still loyal to the technology and what they bring to the enterprise world from a security standpoint."
Gartner analyst Nguyen agreed with Jordan. His reasoning, though, is that RIM's efforts to compete against competitors in the consumer space are futile. It should stick to what it knows.
"I think really the opportunity moving forward is maintaining where they are, at best, and really relying on security, privacy and really within the enterprise," he said. "I don't think there is an opportunity to come out and go head to head with an Apple. But not even going that far, I just don't think it's in their DNA to step up that consumer effort. And I can't even say that would be worth their while."
Nguyen noted that the upcoming BlackBerry 10 OS, RIM's next-generation OS slated to launch early next year, will yield new BlackBerry devices touting some consumer-centric features, such as a touch-screen keyboard. But its best shot at revival still lies with the business user.
"That's fine and great," he said of BlackBerry 10. "But I think they will and they should continue to focus on a lot of their core propositions like security, privacy and especially their physical keyboard which they are known to be so great at."
PUBLISHED OCT. 2, 2012