RIM’s Situation ‘serious’ but not dire

Research In Motion Ltd. (RIM) finds itself subject to more unpleasant North American news headlines in the last few days including a story that suggests the BlackBerry maker's recovery window is nearly closed. The Globe And Mail reports Waterloo, Ont.-based RIM took a hit of almost half-a-billion dollars on its PlayBook tablet and unsettling news about sales of its new BlackBerry smartphones have rattled investors. Meanwhile, success in one of RIM's most crucial overseas markets in Indonesia is seemingly overshadowed by word that RIM's Indonesian CEO Andrew Cobham will be charged with negligence due to a Jakarta sale that turned into a consumer stampede in the finest of Black Friday traditions.

Warren Shiau, director of research, Consumer Insight & Technology, Leger Marketing in Toronto, says RIM is now is a serious situation. Consistently missing numbers and being unable to guide Wall Street to where its numbers are coming from is hurting the vendor's credibility.

"The big problem is that it gives the impression that RIM doesn't know its own business. So order No. 1 of the day is to stop any over-optimism and start giving out a real range of what could be happening in order to win back credibility for management," he says.

Next, Shiau continues, is to outline a competitive plan. There are many developing country markets where RIM is doing exceptionally well but it's no secret that there are other device makers like Huawei that are targeting the same markets.

"Show everyone a realistic plan to inspire confidence in markets where things are already going well. For markets where RIM is trying to recover, management needs to give confidence it understands exactly where Apple and the Android gang are working RIM over," he says.

Kevin Restivo, mobile phone analyst for IDC Corp., argues RIM is merely in a transition phase with respect to its forthcoming BBX operating system (OS) and that in-turn is negatively impacting its results.

"We still very much see RIM as a viable player in the mobile ecosystem. Having said that, it's incumbent upon the company to expedite the transition period if possible," he says. "The longer it stretches on for, the greater it is prone to the potential for market share losses.

"(RIM is) not going away anytime soon, if ever. The question is how much share can it regain? 2012 is a critical year for RIM . . . North America is a high-visibility market and it sets the pace for the rest of the world in many ways. RIM needs to regain share in lucrative markets like the U.S. and Canada. Their next-generation BBX smartphones need to be a success."

Michelle Warren, principal, MW Research & Consulting in Toronto, agrees RIM faces a few issues which has affected its market forecast beyond disappointing PlayBook tablet sales.

"Keep in mind that for many years, RIM dominated the landscape, the competitive nature of which has changed dramatically even in the last two months," she says. "RIM is behind the ball on apps — no question — and that too is contributing to the diminishing interest in BlackBerry devices.

"RIM's difficulty with forecasting accurate market demand and supply is another issue."

Despite this, and regarding 2012, Warren maintains Canada's largest tech company still has a chance to prove its naysayers wrong.

"RIM is worldwide. It is easy to think that if they lose market share in the USA, that then they are going to close their doors. They compete powerfully and effectively across the globe," she says. "They balance product sales between the corporate world and consumers. Teenagers and 20-somethings love their BlackBerrys. IT departments are sold on it. Yes, they face competition now and it looks tough, but long-term sustainability is possible. However, the mounting pressure from investors might force RIM to make some changes over the next quarter."

IDC's Restivo says Indonesia is a bright spot for RIM right now and that the company needs more success stories like it.

"It's lost share in the U.S. and some other markets but it's gaining share and growing in a lot of other markets such as Latin America for year-over-year percentage growth for instance," he says. "India is also becoming a brighter spot for RIM too.

"The danger for RIM in emerging markets where its growth is in triple digits or accelerating right now, is replicating that situation in North America where it's obviously lost share over the last 18 months."

Also adding a positive albeit cautious note, Shiau says RIM's forthcoming BBX OS will level the playing field in terms of pure platform capability but that in and of itself won't be enough.

"BBX isn't going to do it for RIM alone and management needs to convey the message that it understands exactly where the company hasn't been executing well . . . and where RIM is going to make its stand and turn things around," he says. "Ultimately this is going to be RIM's battle alone, because anyone who'd buy them is already committed to other platforms."