Three Things RIM Must Do to Remain a Player in Superphones

Shares of Research In Motion slid last week after the manufacturer reported fourth-quarter revenues and unit shipments that fell short of Wall Street expectations. But the fallout reached far beyond mere stock prices: Goldman Sachs reduced RIM to sell from neutral, a decision which the Wall Street Journal blamed on the company’s ebbing presence in high-end 3G smartphones thanks to the increasing presence of the iPhone and Android handsets. Business Insider was less nuanced, proclaiming simply that “RIM is screwed.”

Actually, it’s not.

At least not yet. It’s true that the BlackBerry — whose brand is about as hot as Oldsmobile — has ceded ground to sexier handsets like the iPhone. And recent figures from Crowd Science indicate that BlackBerry owners continue to have a bad case of iPhone envy three years after Apple launched the iconic device. But as Minyanville pointed out last week, RIM grew by 18 percent in the fourth quarter, and its first-quarter revenue guidance implies a 27 percent gain over last year’s figure.

So for the next couple of quarters, at least, RIM looks healthy. But competition in the smartphone space is more heated than ever, and the introduction of Microsoft’s Windows Phone later this year is sure to ratchet that up further. Here are a few things RIM must do if it is to remain on the same field with Apple and Google:

Overhaul its operating system — or build an entirely new one.

BlackBerry’s inferiority to newer smartphone platforms is well documented. The OS is more cumbersome for users and simply can’t handle the kind of immersive apps that have become so popular on the iPhone and Android devices. A new mobile browser that will come to market later this year is a good start, but it isn’t nearly enough. If BlackBerry OS can’t be dramatically updated, RIM should take a page from Microsoft’s playbook and deploy an all-new platform that will appease those looking for mobile entertainment as well as business applications. That would require RIM to support dual operating systems, but that’s a better option than supporting a single obsolete platform.

Expand its app store.

BlackBerry App World celebrated its first birthday last week, and RIM claims to have 200,000 developers worldwide. That figure contrasts starkly with the store’s 6,000-plus apps, though — a figure that pales compared to Apple’s App Store and Android Market. That weakness is especially glaring because BlackBerry users are far more willing than other smartphone owners to pay top dollar for applications. Apple’s brilliant “There’s an app for that” campaign has sparked awareness of how just how valuable smartphone applications can be, and RIM’s key demographic of connected professionals hungers for the kind of practical apps that can fetch big money. If RIM can build a well-stocked storefront with quality titles — not the novelty crap that so many iPhone users love — it will expand a brand new revenue chain and give users an entirely new reason to carry a BlackBerry.

Exploit its carrier relationships.

Palm’s webOS gadgets and Google’s Nexus One fell far short of expectations thanks to a lack of marketing support from network operators, underscoring the vital role carriers must play in moving smartphones. RIM has long enjoyed strong relationships with carriers around the world, and Verizon Wireless’s buy-one, get-one promotions have done much to strengthen BlackBerry sales for more than a year. RIM has a tremendous opportunity to differentiate itself from Apple and Google by aligning itself with carriers and giving up a healthy share of app revenues in exchange for strong marketing support.

None of these is easy, obviously. Expanding App World will require investment from developers who have an ever-increasing number of operating systems on which to build. Launching (or acquiring) a new OS is sure to alienate some current BlackBerry users as well as developers who are already building atop BlackBerry OS. And it’s never easy to play ball with carriers, who — especially in the U.S. — consistently want to control as much of the ecosystem as possible (and sometimes more). But each of these three problems will have to be addressed — and quickly — if RIM is to remain a major player in the new world of the superphone.

Question of the week

What else must Research In Motion do to remain competitive with Apple and Google?
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Colin Gibbs

Colin Gibbs

Mobile Curator Gigaom Network

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4 Comments Subscribers to comment

  1. Basic error here is comparing the company IT department centered BlackBerry against the consumer oriented iPhone. ^^^RIM needs to keep their focus on the CIOs of the world and then continue to build a consumer handset product line. As I understand it, in the 18 to 24 age group, RIM beats Apple because of BBM and the physical keyboard.^^^

    The competitors for RIM are Microsoft and Symbian/Nokia. However, Redmond shows no real focus on the enterprise. Microsoft has too many OS’s (WiMo 6.5, Pink, Danger, and WinPhone/Zune).

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  2. You’re absolutely right that RIM must continue to focus on the CIOs of the world, Michael. But end users are increasingly determining which device(s) they carry for business, so RIM will also have to find ways making the BlackBerry more appealing to consumers or risk becoming a vendor of enterprise-only devices — which is a much smaller market.

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  3. Yeah, it’s screwed.
    Of the 3 options, only one remains feasible (carrier relationships).

    ^^^They can’t just wave their magic wand and make their app store legit and I doubt, given their built-in email-centric/messaging DNA, that they can truly overhaul their operating system.

    Not toast. The market’s simply too big for them to fail, I think. But not a key player.^^^

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    1. You might be right that RIM is screwed, Brian, although I don’t agree — yet. They continue to gain momentum, for now, which buys them time to address the issues that threaten their long-term viability. They’re gonna have to show more of a sense of urgency than we’ve seen so far, though.

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