Nokia’s CEO Stephen Elop did not mince words when he took up the new job earlier this year: The Nokia branded platform was in drastic need of renewal. Out with the old software and embedded management culture pulling the company under. Tackle the hard work and make things happen. The same snapshot could apply to RIM in 2011. However, while Nokia working closely with Microsoft has a chance at a comeback, RIM is still struggling on its own.
PlayBook troubles
RIM’s profit warning was not completely unexpected, but the situation described by the company does not sound pretty. After several difficult quarters in a row, Q3 also turned out badly. The stone around the company’s neck is without a doubt the PlayBook tablet. RIM is now taking a USD 485 million charge to write off the device. Or more precisely, devices, as there appears to be nearly a half billion dollars worth of them lying around waiting for buyers.
Despite repeated price cuts, the PlayBook just doesn’t seem to appeal to customers, and the question is whether it ever will. The weak demand, with just 150,000 sold in the three months to November, is driving the company to increase its promotional activity. It’s still unclear how this will take shape. In any event, the lowered price does not appear to be winning customers over. Any further price cuts, which have already reached a few hundred dollars, would put further pressure on RIM’s results. What could save the PlayBook is adding some important functionality currently missing from the device, such as 3G support, native apps for e-mail, agenda and contacts and BlackBerry Messenger. For all these things, a Blackberry phone is still needed.
BlackBerry on track
Happily for RIM, BlackBerry smartphones are still selling in line with expectations. The company sold 14.1 million phones in Q3, in line with its earlier guidance of 13.5-14.5 million. At the same time it’s not as if sales are growing quickly, as promised by RIM’s management. The company proudly unveiled a new range of phones during the summer, all running the new OS 7. The new operating system promised a number of improvements and especially more apps. The company also said it would soon launch QNX, the OS used on the PlayBook, for its smartphones. All these developments gave the company a new shine for a time. After several quarters of stormy weather, RIM was finally bringing some good news.
This all came to an end in October after the global service disruption on the BlackBerry network. The technical problems meant millions of BlackBerry users were unable to access mobile internet services such as BlackBerry Messenger. The highly sought after group of 15-24 year-olds who had grown addicted to BBM were some of the worst hit by the outage. In the mean time the trend of employees bringing their Android devices, iPhones and iPads got well underway. RIM’s shaky foundation led to the company saying in the latest profit warning that it will not meet its targets for fiscal year 2011, sending the company’s share price again lower.
While it is still just speculation, it is no longer unthinkable: executives will be meeting to consider the possible synergies from a takeover of RIM. Candidates could come from anywhere, as shown by the vertical integration envisaged by Google’s takeover of Motorola or the cooperation between Nokia and Microsoft. In the mobile (internet) industry, hardware and software are more inseparable than ever. It’s been said before: RIM cannot allow itself anymore mistakes. In fact, in 2012, it will need to work harder than ever in its history.
