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May 1, 2011 7:56 pm
Has BlackBerry maker Research in Motion lost its mojo? RIM stunned investors last week by issuing a profit warning that it blamed on slowing sales of its ageing handsets in core markets including the US; lower average selling prices; and delays in shipping a new generation of devices.
Now investors and analysts are wondering whether, as RIM’s senior management claims, the sales slowdown and profit warning represent a temporary hiccup as the Canadian company transitions from one generation of BlackBerry smartphones to the next. As with Nokia, the alternative could signal more fundamental structural problems for a company that helped pioneer the fast-growing market for smartphones, but that now faces a much tougher competitive marketplace.
As the 14 per cent share price decline in the wake of the profit warning shows, RIM’s senior management team, led by Mike Lazaridis and Jim Balsillie, co-chief executives, faces an uphill battle restoring credibility in the face of what analysts such as Mike Abramsky of RBC Capital Markets are already calling a “mis-execution” of strategy.
RIM’s management will face these and other questions at the company’s annual BlackBerry World conference, which kicks off in Orlando, Florida, on Monday, where it is expected to unveil the first of its next-generation BlackBerry devices – even though their market debut has now been pushed back until later this year.
Winning over the software developers who will attend BlackBerry World – and assuring them that RIM has a long-term strategy to compete against rivals including Apple and manufacturers of Google Android-based smartphones – is crucial if RIM is to stop the slide in its global market share and regain its reputation for innovation.
BlackBerry handsets with their mini Qwerty keyboards and wireless “push” e-mail capabilities were once the “hot” technology item to been seen with. Celebrities, politicians and captains of industry touted BlackBerry devices to prove their digital credentials. Today, however, BlackBerrys are not generally seen as being “cool”.
Stacked up against touchscreen-based smartphones such as Apple’s iPhone and Android-based handsets from HTC, Samsung and Motorola among others, the current generation of BlackBerrys has begun to look increasingly dated.
The BlackBerry’s rock-solid wireless e-mail functionality is no longer a unique selling point; the devices themselves look increasingly underpowered; the BlackBerry browser is slow and cumbersome compared to its rivals and the add-on software apps in the BlackBerry World online store lack the excitement and panache of those available for the iPhone or Android.
Even the recent launch of the Playbook PC tablet, which will also power a family of “super” BlackBerrys due to launch next year, appeared somewhat botched. Mr Abramsky at RBC noted: “The PlayBook is a promising tablet contender, but RIM bears some responsibility for its less-than-favourable debut, confusion over its positioning and criticisms it was not fully ready for market.”
RIM has traditionally had strong relationships with mobile network operators, boasts a mostly loyal customer base of more than 60m users and remains a favourite with corporate IT departments because of the BlackBerry’s inherent security and manageability features. But over the past 18 months there have been growing indications that its glory days may be over.
“RIM is facing three major challenges,” said Pierre Ferragu of Sanford Bernstein. “On its historic customer base, BlackBerry is a broken brand; RIM’s business with corporate clients is ex-growth and under attack; and RIM’s premium profitability is at risk.”
The challenge for RIM’s co-chief executives in Orlando this week will be to change such perceptions and persuade those attending BlackBerry World that while RIM may have hit a rough patch, it has the products and strategy to remain relevant in the increasingly competitive smartphone market.
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