BlackBerry Revival Requires Sure Touch

Monday, January 23rd 2012. | Gadget News

For Research In Motion, this weekend was all about research in demotion.

Unfortunately for investors, the departure of Co-Chief Executives Mike Lazaridis and Jim Balsillie came with no obvious shift in the BlackBerry maker’s strategy. Ultimately, to save the company, new CEO Thorsten Heins may have to get more radical and exit from handsets completely.

BlackBerry_Bold_TouchWith a change at the top, investors were excited the door might even be open for a possible sale of the company. Yet shares dropped about 7%, to below $16, in Monday trading after Mr. Heins said he doesn’t plan a big break with the past. His focus, he said, will be improving both product development and marketing to consumers.

But what good is a catchy slogan if RIM doesn’t have any smartphones worth buying? Having stubbornly stuck to keyboard-based BlackBerrys, RIM can’t compete with flashier touch-based devices from the likes of Apple and Samsung. As those two have separated from the pack, the smartphone business has become a two-horse race, says analyst Neil Mawston of Strategy Analytics. It is possible RIM’s market-share decline may have turned into a free-fall in the fourth quarter in the face of big sales from Apple’s new iPhone 4S.

Like his predecessors, Mr. Heins is staking the company’s future on a new operating system. Originally expected in its smartphones early this year, RIM now says not to expect those phones until the end of 2012. That launch date, if RIM can meet it, would be nearly six years behind the first iPhone.

On the present course, it isn’t hard to see RIM turning into another handset flameout like Palm. RIM hopes its new operating system will reinvigorate its products and perhaps appeal to other handset makers interested in licensing it. Yet two mobile operating systems, Apple’s iOS and Google’s Android, already dominate the market. And Microsoft’s Windows Phone, being distributed widely on Nokia’s handsets, is likely to emerge as the third. There seems little room for a fourth.

Even if RIM doesn’t want to sell itself, there is still hope for shareholders. Network outages aside, the company tends to deliver email more quickly, efficiently and securely than rivals through its proprietary network of servers. Subscription fees paid by BlackBerry users to access this network generate a bit more than $3 a share of earnings per year, estimates Jefferies Research analyst Peter Misek, while handsets now contribute little to no profit. Of course, if BlackBerry devices disappear, so will this revenue stream. The solution, argues Mr. Misek, could be to offer the BlackBerry email experience to iPhone and Android users for a fee.

In that scenario, BlackBerry would lose a key selling point for its devices, meaning RIM might have to scale back its handset business.

It would be a risky path. Yet it may grow increasingly appealing if RIM continues to slide.

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