RIM’s earnings yesterday were terrible. What does that mean for the company? Are they doomed, or can they turn this thing around?
We think the chances of a successful turnardound at this point are very low. Here’s why.
Its future business looks like it’s nowhere. Perhaps the most dispiriting part of the earnings call was the total lack of clarity about RIM’s next generation platform QNX. No clarity on when QNX phones will be in the market in the real way, and more generally no clarity on how QNX can compete with excellent platforms like iOS and Android that are taking the market by storm.
Its current business is imploding. The less said about it the better. BlackBerry is the world’s best horse-and-buggy in a Model T world: it’s the best e-mail device in a world where other functionalities like full-web browsing and apps are more important than e-mail, even and increasingly for corporate users, and smartphones are invading the last RIM bastion of the corporate world.
RIM has no future in tablets. The only way anyone can conceivably compete with the iPad is with a) a lower price and b) a different story. Amazon is attempting to do that with its media-ecosystem tablet. That’s not something RIM can do, and it is highly doubtful that even enterprise buyers are going to spring for such a stunningly inferior product (the PlayBook can’t even do email out of the box).
The emerging markets story isn’t clear at all. Perhaps the last bullish RIM story is emerging markets growth, where the BlackBerry brand is still strong and where markets are growing. The story is more complicated, however. Competition is strong. Nokia has better distribution and is coming out with a more credible platform. The open source Android model is perfect for making cheap, high-powered phones that can appeal to emerging markets consumers. And as prices keep dropping on the iPhone 4 and 3GS, and especially if Apple introduces a sometimes-rumored “iPhone lite”, there will be an emerging markets story for Apple as well. Even under the most optimistic scenarios, emerging markets growth for RIM should come at the expense of margin compression due to competition and lower purchasing power.
There is no captain. RIM’s corporate governance structure, silly at any time, looks particularly reckless in a turnaround situation. If RIM is aware that it’s in a turnaround situation, which there is no indication they are. In all their public pronouncements, RIM executives seem to just not grasp the predicament they are in. It’s anybody’s guess whether Nokia’s Windows strategy will pan out but at least the company faced up to the situation, fired its CEO, killed its previous platform and went in an audacious new direction.
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