On Thursday June 28, 2012 Research in Motion announced yet another quarter fraught with significant dollar losses, to the tune of $518 million. The stock has dipped ever lower, and shipments of BlackBerry devices overall fell again, this time from 11.7 million to 7.8 million units for its current Q1 2013 period compared to last year's first quarter. The loss compares to a profit of $669 million in the same quarter last year. Revenue quarter over quarter fell from $4.9 Billion to $2.8 Billion - a precipitous though not surprising drop. RIM still has $2.2 billion in the bank, but those dollars are neither here nor there - RIM can continue to operate, but what will it be operating towards?
RIM once operated from a position of total power - all the major carriers used to refer to having to pay "the RIM tax" - a reference to RIM devices and email software being so popular that the carriers had to operate at a disadvantage in terms of what it cost to do business with RIM relative to all other vendors. That dynamic has now shifted. The company noted that it is now selling far more phones at the low end of the line, and is being forced to subsidize those sales with the carriers to keep prices low enough to keep even the low end phones attractive to users.
That was the Good News
As "grim" as those numbers are, that is not even the bad news. Much of that financial scenario was anticipated by most, if not all of us who cover RIM. But…let's make that BUT…following the numbers decline CEO Thorsten Heins then announced that new BlackBerry 10 devices and the new BlackBerry 10 operating system would not reach the market this year. That is, all promises that the company would deliver its new hardware and its new operating system in the fall of this year - in time for the holiday buying season - are now null and void. There will be no new hardware or operating system from RIM until…next year. Meanwhile the company anticipates reducing its overall staff size by approximately 5,000 or so employees.
Heins claims that the company has been "overwhelmed" by the amount of software it is currently dealing with. That is not the impression he gave during BlackBerry World in early May 2012, when he essentially said that he had undergone software reviews and everything was looking tight and on schedule. It is also an odd admission to make at this late date - for a significant software technology vendor to have insufficient developer, software Q&A, and software testing resources at this extremely late stage of the game is indefensible.
Heins noted that he could not release a product that would not meet the needs of his customers. But…at this rate one has to wonder if he will have enough customers left that it will matter.
It's Not a Hill, It's Mt. Everest
What is RIM looking at now? Even those of us who are rooting hard for RIM to succeed - and that is Mobile Enterprise's position (a strong RIM is vital for the overall enterprise ecosystem) - have to wonder what RIM is going to be able to offer "next year." In the face of:
- Samsung's Galaxy Note and current Galaxy S III
- Apple delivering retina quality displays across every class of device it offers
- Microsoft totally reviving its strategic mobile efforts (especially relative to the enterprise) - with Windows 8 just about to be released, its Surface tablets and its new Windows Phone 8 capabilities (and its ties to big brother Windows) and new smartphone designs coming from its vendor partners, and its rapidly developing app store
- Google delivering Android 4.1, and a new and potentially hot (albeit consumer-focused) tablet
- The monster-sized Apple App Store and Google Play ecosystems
- The upcoming Apple announcements on its next generation of iPhone (which will arrive in plenty of tie for the holiday buying season)
It was crucial for RIM to deliver in the fall of 2012. Perhaps the Mt Everest viewpoint is the wrong viewpoint. It may be more appropriate to think of Thelma and Louise arriving at the edge of the cliff.
A sale of its assets may now be the only remaining remedy for its investors. But we have to wonder what exactly it has to sell at this point. Its hardware has no proven "futuristic" path. And BlackBerry 10 is simply not going to offer enough - if any - real differentiators that any other hardware vendors might consider licensing or acquiring its software assets.
Yes, Samsung's CEO has publically stated that software is the key to mobile device success, and perhaps there is a logical move to be made there - but Samsung will most likely continue to look to Android and - we predict - return to Windows. We believe Samsung has learned its lesson about driving a mobile operating system internally.
So we are left with two potential scenarios. The first is that RIM will overwhelm us "next year" with a revolutionary product suite of some sort. Or RIM will put its OS into the public domain (WebOS all over again) and then disappear. It is an unfortunate situation. We feel bad for Heins - the cards that RIM's former CEOs dealt out are proving impossible to play well - it isn't the player in this case, it’s the bad cards Heins has no choice but to hold and play. We'll keep rooting for RIM to succeed in any case.