Blackberry's choice

Monday 19 August 2013 10.37
Blackberry CEO Thorsten Heins forms 'special committee' to look into the possibility of striking up new commercial partnerships or selling the company outright
Blackberry CEO Thorsten Heins forms 'special committee' to look into the possibility of striking up new commercial partnerships or selling the company outright

Niall Kitson asks if the company formerly known as RIM has given up on its turnaround strategy.

If you enjoy boardroom turbulence there is much to savour in tech right now. Job cuts, management reshuffles and the ditching of products that should have been ‘the next big thing' are dogging some of the biggest names in the business.

Take these examples: Nokia, under former Microsoft executive Stephen Elop, is turning the company's fortunes around with its Lumia range of Windows Phone-powered handsets; Yahoo, under former Googler Marissa Mayer, has been redefining itself through a series of job cuts and acquisitions of start-ups in the mobile space; and Michael Dell has been locked in a tussle to take back the company he set up from his garage. Now we can add Blackberry - formerly Research in Motion (RIM) - to the list of companies in transition.

Last week, Blackberry CEO Thorsten Heins announced the formation of a five-strong 'special committee' of board members to look into the possibility of striking up new commercial partnerships or selling the company outright. The news marks the latest hurdle Heins will have to overcome since the departures of co-chief executives Jim Balsille and Mike Lazaridis in late 2012. So far, he has had to oversee a painful cost-cutting plan to shed 5,000 jobs and slim down the board. Senior VP of manufacturing Carmine Arabia and vice presidents Doug Kozak and Graeme Whittington all made dignified exits - perhaps more will follow.

Are its competitors impressed at the swingeing changes? We don't know of anyone sufficiently moved that they would enter acquisition talks. Lenovo, however, has said it "definitely" is not interested.

Mapping the decline of Blackberry from star to bit player in mobile is a simple affair. Up to the end of 2006 the trend is largely positive before slow decline sets in, ending in a single digit market share. When did the rot set in? You can narrow it down to one date and one product: 9 January 2007 and the preview of the first-generation iPhone.

Looking at market share stats by analysts Gartner for the last quarter of 2006, the personal data assistant (PDA) market gave Windows mobile a 56.1% global market share (fragmented across manufacturers), followed by Blackberry on 20%, Palm on 11.1% and HP on 9.7%. At the time, shares in RIM traded at about $200.

Contrast that with figures for the second quarter of 2013 by IDC for operating systems in the smartphone space: Android enjoys 79.3% of the market, iOS has 13.2%, Windows Phone has 3.7%, and Blackberry has a 2.9% share. At time of writing you can buy a share in Blackberry for $10.

Storm warning

What happened between the end of 2006 and now for Blackberry is a textbook example of corporate hubris. RIM's strength was the combination of reliable hardware and software with a full-sized keypad that made typing full length e-mails palatable on a small screen - the perfect productivity device for business. That was the offering and it fulfilled customer expectations. Then came the iPhone, a gadget that, according a former employee ‘Kentor' posting on discussion forum Shacknews.com, was considered technically impossible. Research and development on a competitor began immediately, but the resulting Storm, a device that had more of a 'press screen' than a touch screen, got to market only as the App Store was going live. The Storm blew itself out quickly.

RIM was on the back foot again in 2011 when it tried to catch up with the iPad. Rushed to market without native e-mail and calendar applications, the Blackberry Playbook has sold almost 2.5 million units to date but cost RIM $485 million.

This year and we got the release of the Blackberry 10 operating system and two impressive handsets: the touch screen Z10 and the Q10, which sports the familiar Blackberry design. We don't have sales figures for either model but we do know Blackberry shipped 6.8 million phones in the second quarter of 2013. Contrast that with iPhone sales of 31.2 million in the same period.

But let's not treat Blackberry as a lame duck just yet. The Blackberry Messenger (BBM) Service would be a prize acquisition for any corporate suitor. At a time when users are becoming nervous about US government agencies like the NSA having access to individuals' web histories and e-mail accounts, a secure, non-American messaging service would be a compelling proposition. Later this year we will be seeing BBM on Android and iOS handsets, so we'll know more about its commercial potential outside of Blackberry handsets. If BBM takes off on other platforms Heins and co. would be giving up the kind of hardware/software exclusivity that has done Apple so well, but it would open up new revenue opportunities by either charging for the app outright or introducing a subscription system. Mind you, doing both wouldn't be a bad idea, either.

Blackberry botched its development of devices in what we now consider the mobile space. That its future lies in one of its older technologies says a lot about how far it has failed to come.

Niall Kitson is editor of TechCentral.ie