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The parable of RIM

Here are the highlights from RIM’s latest quarter:

  • 14.1 million BlackBerry smartphones shipped, 13 million sold through
  • 150k PlayBook shipped with sell-through slightly higher. 800k PlayBooks shipped so far.
  • BlackBerry subscriber base up to 75 million
  • High growth cited for U.K., France, South Africa, Mexico and Argentina, Indonesia, Saudi Arabia and South Africa. RIM is the #1 smartphone vendor in the Latin America and Caribbean region. Sales outside the US, UK and Canada were 61% of revenues. US is now 20% of sales, UK 11%.
  • Hardware growth outside the US was 56%
  • There are 630 carriers
  • 50k apps in App World with 5 million downloads per day
  • Forecasting 11 to 12 million smartphones next quarter

Given the channel fill with a new product, the device business was marginal at best. The company obtained -1% growth y/y in units but 31% sequential growth from a transitional quarter. The average selling price (inclusive of service revenues) is $354 and about $280 excluding service revenues. I estimate that operating margins have dropped to about 11%. Not a good story, but one we have been warned to expect.

But a crucial new twist to the story is that RIM announced that they don’t expect new BlackBerry 10 devices until late next year. That came as a surprise and the stock sold off significantly, valuing the company at well below book value.

Stepping back, the biggest surprise is that the company seems to have had no plan for sustaining itself.

Let me explain.

If you go back to 2005 or so the world of smartphones was a mix of modular OSs and integrated platforms, much as it is today.  Not unlike Android today, Windows Mobile was successful in licensing to dozens of vendors who in turn released hundreds of products. Symbian also was licensed but most volumes came from Nokia and they held the lion’s share. Then there was the BlackBerry integrated solution which worked smoothly and had devoted fans who upgraded every chance they had and operators who were joyous at the new ARPU. There was also PalmOS as offered by PalmSource trying to be a “third horse” and unseat stodgy old Microsoft.

It was into that fray that both Apple and Google jumped. Google acquired Android in 2005 and Apple was busy polishing a version of OS X that would became iOS. In three and two years respectively these platforms would be in the market.

Regardless of the actions of rivals, all competitors must have faced the same questions in 2005: As technology was changing rapidly and as they all had access to component roadmaps, what is the best technology approach to this market? Should they embrace certain innovations to sustain their business trajectory? RIM had a tightly integrated software, hardware and service offering. What could make it better? Nokia was also basing its products on a more loosely integrated offering (nominally it was modular, but only just). It saw the writing on the wall and began developing a Linux variant (Maemo) as a potential candidate to replace Symbian. Microsoft was basing its solution of a modular approach. Windows CE was ok as a kernel but they had layers on top which were optimized around stylus-based user experiences (analogous to mouse actions). Could it take on a rich computing experience?

There were many experience candidates. Stylus, keypad, keyboard all had adherents. There was a lot of hesitation. After the iPhone launched with capacitive (finger) touch, resetting user expectations, it still took a year for many of the vendors to re-consider their technology plans. The weakest changed first.

Microsoft felt the pain quickest. They also had the least to lose since revenues from Windows Mobile were paltry. By 2008 internally they turned 90 degrees. They embarked on re-building their user experience and orphaning the Windows Mobile ecosystem and many of the vendor relationships they had built. Palm dropped PalmOS and built WebOS internally quite quickly. They licensed Windows Mobile as a stop-gap. Around the same time Nokia doubled down on Maemo and joined with Intel to form MeeGo. They did not orphan Symbian though and kept trying to adapt it to the new experiences and input methods.

But RIM did nothing. Almost nothing. They were the healthiest competitor. They felt no pain from iPhone’s entry. The platform they had built was still growing and they were tweaking it constantly. There were always improvements to point to but fundamentally the code was limited. It was very difficult to adapt it to touch input and the first attempts at a touch UI were embarrassing. But there were no signs of a new platform that reflected the Unix-like competition.

As I pointed out in an earlier post, Unix-like operating systems were having their revenge. To a computer scientist the future of mobile computing would mirror that of personal computing in terms of architecture. The foundations of the early smartphones were built on constraints that were disappearing while being unable to accommodate new input methods. In other words, the early efforts were optimized around those constraints and sub-optimal for rich user experiences. They had to be. There were limited processors, memories and screens and battery life.

It turned out that all the early mobile operating systems were unsuitable for the advances in technology that came after 2007. Companies which were able to adapt or embrace Unix-like operating systems in a mobile context gained the ability to grow with the new input methods. The sooner they “pulled the trigger” on the shift, the better off they were. This is in fact what enabled entrants to gain footholds. Entrants entered with Unix-like OSs straight away while incumbents had to justify changing and the more successful they were the harder it was to justify changing.

RIM had trouble justifying this change. It waited until 2010 to finally acquire the QNX asset that would offer them a stronger software foundation.  It still had to adapt this acquisition and it looks like it won’t be done until at least 2012, seven years after they should have started. And this should be seen as a sustaining technological change. A new OS is not a disruptive technology to what is already a mobile computer.

However, delays like these can be fatal. We see the impact on Microsoft who was earliest to push the reset button in 2008. It still took two years to rebuild Windows Mobile into Windows Phone and is now still struggling to regain lost share (less than 2% today). We see the impact on Nokia which was unable to affect a transition to MeeGo due to a litany of issues and had to throw in the towel on self-determination. We see the impact on Palm which lost its independence as WebOS was a bit too little too late.

These companies had the right technical strategies but suffered from execution and business architecture issues. RIM is years late in embracing what appears to be a sustaining improvement.

But whenever you see what appears to be a coordinated effort by companies to fail simultaneously you have to ask if the change they struggle with is really sustaining or disruptive. The pattern makes me suspicious that what RIM, Microsoft, Palm and Nokia faced was more than a failure to embrace a sustaining improvement. I suspect that the failure is evidence of tectonic shifting of business models.

  • http://www.smartlevers.com Rukesh Patel

    “what appears to be a coordinated effort by companies to fail simultaneously”
    Love that phrase and the stark visual image it evokes!

    The post reminds me of the ‘strategic inflection points’ of ’10X change’ that Andy Grove talked about and how the ‘point’ is not really a point but “a long, torturous struggle” through the “valley of death”.

    Eagerly await the next post after the cliffhanger you ended with.

    “These companies had the right technical strategies but suffered from execution and business architecture issues… I suspect that the failure is evidence of tectonic shifting of business models.”
    Do you mean different things by ‘business architecture’ and ‘business model’ here? If so, can you clarify what you mean by ‘business architecture’?

  • http://michaelkdawson.com/ TrendRida

    I thought you were finally going to put some of the blame on management – then you threw me a curve with your last sentence. Until Apple or IBM completely fall on their face, I’m not going to buy this theory of “disruption just happens regardless of management.” 

    • Anonymous

      Stating management is to blame is unnecessary, an ineffective form of discourse and I think something Horace tries to avoid. Readers will believe what they want and agree or disagree based on their own perspectives, likely digging into their current position. To cast light on a situation and its background and then allow the reader come to the conclusion that management wasn’t up to the task is a much more effective way of getting the point across. Teaching is not about listing facts or stating opinions to students and readers but rather providing them tools to come to their own conclusions. A person who comes to their own conclusion will ingrain that knowledge to a depth not possible by jumping to the summary and just reading “facts” or “statements”. View Horace as the teacher of a college seminar where he is the guiding handing but the participants and their discussions are the driving force. It’s the whole “intersection of liberal arts and technology/business” thing. Or maybe that’s just how I use Asymco and I am reading into it what I like. 

      • http://michaelkdawson.com/ TrendRida

        I love the whole intersection between liberal arts & technology thingy, but what separated Steve Jobs from a college professor is that he found a way to implement the theory and build an incredible company. Personally, I’m more interested in the implementation that’s why I mentioned Apple & IBM.  Both companies found ways to avoid/minimize the disruptive forces and sustain successful companies. If companies understood and practiced those principles maybe they could avoid becoming the next RIM…

      • Anonymous

        I agree that implementation is the key, and Horace states he believes this is neither magic nor chance but can be quantified. He’s trying to understand why and how Apple has done what it has done and continues to do so from the background of its disruption of the mobile industry. He may have hidden agendas or hopes for where the discussion will go, but ultimately everyone who comments is contributing to what is discovered. I just don’t think Horace stating one way or the other would help the discussion other than to polarize it or as a way of sparking debate. The debates/discussions happen anyway. It’s perhaps better that we bring our conclusions or contributions to the comments and discuss and debate them with Horace’s input. But again, I freely admit that this is just my way of using Asymco and not necessarily how others treat it or should treat it. 

        My conclusion from this post is that RIM’s management was not up to the task of believing that disruption could even occur. Horace gives credit to Microsoft for shifting earliest among competitors but in the end, they had least invested in their previous platform. RIM is the classic example of a company that invented something pretty cool but was too invested in the original idea and in maintaining the status quo and refused to admit the sands had shifted, even several years after they were supplanted. The next question is how do you protect against that kind of hubris once you are in that position? That’s the kind of thing that needs to be thought out before you are there because once you are in it, it is likely hard to see or admit it.

      • http://michaelkdawson.com/ TrendRida

        “The next question is how do you protect against that kind of hubris once you are in that position? That’s the kind of thing that needs to be thought out before you are there because once you are in it, it is likely hard to see or admit it.”

        Excellent point. We are in 100% agreement on that…

      • http://worldisgreen.com/ Suhit Anantula

        There is a good book on this called by the Design of Business by Roger Martin who is the Dean of the Rotman School of Management in the University of Toronto. Incidentally, he uses RIM as a great example of how to manage disruption and in fact using this theory we can explain how RIM failed too.

        He suggests what he calls a Knowledge Funnel. It starts with the exploration of mystery, which takes infinite forms. Then, we move to a Heuristic, a rule of thumb that helps narrow the filed of inquiry and work the mystery down to a manageable size. As an organisation puts its heuristic into operation, studies it more, and thinks about it intensely, it can convert from a general rule of thumb. That formula is an algorithm. He does suggest that many products/services and companies cannot always go to the full algorithm level.

        Anyway, the important thing is that every organisation needs to go back to the mystery part of the knowledge funnel once they reach and start to exploit from the algorithm stage. Unless you do that you cannot create the next disruption. RIM basically went through the whole funnel with their two way messaging thing and then went back and came out with the push technology and then stopped. They continued to exploit without going back to the mystery part of the knowledge funnel and asked what will mobile technology looked like in 2005. They did not do that in 2007 when the iPhone launched and that is the critical part of the problem.

      • Just Iain

        Apples way seems to be to plan your own disruption. iPods have/had a life that was finite and Apple replaced it themselves rather than wait for someone else to do it for them. It would be the equivalent of Microsoft planning on the replacement of Windows. I don’t mean in an evolutionary way we have seen so far but rather a revoluntionary way with a ground up rewrite like Apple did with it’s OS.

      • http://michaelkdawson.com/ TrendRida

        Bingo! No company wants to kill its cash cow, but you better believe the competition is trying to do that. Apple chooses to kill its cow before the competition can. 

      • Rj

        Did they plan their own disruption, or do they simply focus on trying to produce the best possible product, providing the best customer experience?

        Not caring if you disrupt your income stream is very different from planning to disrupt your own income stream, although both could seem to be the same from outside.

  • lovedale

    When the iPhone was launched, Samsung was essentially a nobody in smartphones. But now they have adapted/evolved to become No.1 in that category.
    Dont you think that the former has been fundamentally responsible for the latter?

    • http://www.asymco.com Horace Dediu

      I’m not sure how the two are linked. Samsung has a long history of making smartphones. They’ve made them with every available OS from PalmOS to Windows Phone. They did not have volume leadership until recently but I don’t see how that is related to iPhone.

      • Le E

        Samsung’s phones are copies of the iPhone, using an operating system that is a copy of iOS. Not so difficult to see.

  • http://twitter.com/Jussi7 Jussi Hagman

    Nice post, but I’m afraid your timeline is incorrect. I was under impression that Microsoft’s big reset happened first with Windows Phone 7, which shipped late 2010 (rushed, incomplete), not 2008. Windows Mobile 6.1 was released in May 2009, 6.5 in October 2009. 

    • http://www.asymco.com Horace Dediu

      Microsoft began development on Windows Phone in 2008. They scrapped what would have been the next version of Windows Mobile and re-ogranized the group. http://en.wikipedia.org/wiki/Windows_Phone

      • http://twitter.com/Jussi7 Jussi Hagman

        I stand corrected, do you have some good data on when WebOS development started? I remember them announcing it in January 2009 at CES, they must have been working on it for some time.

        And how about “Around the same time Nokia doubled down on Maemo and joined with Intel to form MeeGo”. First Maemo phone was released late 2009. Nokia-Intel partnership was announced  early 2010. 

      • http://www.asymco.com Horace Dediu

        I would guess they started in late 2007 after Rubinstein was hired but I don’t know for sure if there wasn’t some version being worked on before then.

  • gbonzo

    iPhone growth at 10% range y-on-y in searches:
    http://www.google.com/insights/search/#q=iphone&date=today%2012-m&cmpt=q 

    That translates to something like 25% unit growth y-on-y if we exclude all new model transition effects. Calendar Q1 2012 will show if this estimate is right or wrong.

    • gbonzo

      This estimate falls down if Apple brings out a larger screen iPhone 5 before March. The 4S has too small screen to maintain close to 100% growth among competing products.

      • jawbroken

        What do you mean by “too small screen to maintain close to 100% growth”? Where does this fact come from?

      • Justin

        I agree, what does too small a screen actually mean? too small for who?

      • gbonzo

        Too small screen means worse internet browsing experience than competitors.

      • Kizedek

        I’d like to hear about this better browsing experience on phones competing with the iPhone.

        “Proper” browsing on a mobile device is what Apple pioneered with the iPhone back in 200u7 and it is just one of the things they got right: loading real web pages, respnsive scrolling, doubletap to zoom in, reader, etc.

        Has everyone else caught up yet? If they are close, perhaps it is due to their using webkit.

        Seems as though the web browsing stats showed iOS far ahead, despite market share of iPhone vs. Android phones. Of course, the iPad is now eclipsing the iPhone as an internet tool of choice.

        Surely, browsing stats show there is far more to browsing experience than mere screen size.

      • gbonzo

        “there is far more to browsing experience than mere screen size”
        Of course, but screen size is an important factor. A larger screen will improve the iPhone browsing experience. There is a possibility that this improvement happens within a few months as opposed to us having to wait until next fall.

      • Anonymous

        I think you’re focused on one very specific attribute of the phone.  It’s like saying the Toyota Camry won’t continue to sell very well because the car only offers 17″ wheels.  Some people think the wheel size is very important, while others think it’s just for looks.  A large portion of the car buying public don’t even consider wheel size among the decision criteria.You might as well say the iPhone can’t grow at 100% because it doesn’t come in blue.  Or that the front facing camera has too low of a resolution.

        As long as the entire global market for smartphones is growing very rapidly, it won’t take a miracle to grow sales much faster than your 25% estimate.  Your Google  search metric is interesting, and may be a canary in the coal mine, but you’re extrapolating quite a bit on this one.

      • jawbroken

        Web browsing will only really improve for most people if a higher resolution screen accompanies the increase in size. Aside from some subset of the population with vision issues, holding the phone slightly closer has essentially the same effect for browsing (some touch target size differences I’m glossing over though).

        Would you expect them to ask everyone to rewrite their apps for a slightly different screen resolution?

      • gbonzo

        If the iOS platform is any good, different screen resolutions should not be a major concern.

        If a platform does not scale to different resolutions, it deserves to die.

      • jawbroken

        That kind of fragmentation makes things more difficult for every single developer so shouldn’t be taken as lightly as you clearly do.

      • gbonzo

        Web development is not that difficult for different screen sizes.

        I repeat myself, if iOS is so antique that different resolutions create big problems for developers, it deserves to die.

      • http://www.asymco.com Horace Dediu

        How many resolutions does iOS support now?

      • Anonymous

        320 x 480 
        640 x 960
        768 x 1024

      • gbonzo

        So, would a fourth different resolution be too much for developers?

        I think not.

      • http://twitter.com/Marcos_El_Malo Marcos_El_Malo

        Well, you’ve finally made clear your own religious leanings.

      • Davel

        You confuse the platform with the browser. The phone is more than just the browser.

      • Canucker

        Screen size is simply a crutch by which Android competitors differentiate themselves from the iPhone (doubling as a stick by which to hit themselves). You have to remember that the biggest competitors to an HTC or Samsung or Motorola phone is another HTC or Samsung or Motorola phone. Of course, the iPhone is also a competitor, but it doesn’t compete with itself. Screen size helps differentiate because it is something you can directly compare on those shell phones in stores. I don’t think the iPhone sells itself so much on shape (given the experience with the 3G -> 3GS and 4 -> 4S).

        No doubt some/many prefer a larger screen size, but its akin to buying an 80″ TV at some point. Bigger is not necessarily better. 

      • gbonzo

        As long as it is still comfortably pocketable, a bigger screen is better in devices like these.

        Come November 2012 and you will agree, because by then the latest iPhone will surely have a larger screen than 3,5″.

      • Canucker

        I don’t disagree, as I think there is room for screen growth, but not at the rate it’s currently expanding. The iPhone 5 will likely have a 3.8″ screen or something similar. Doubt we’ll see anything bigger though until there is screen resolution independence.

        Easily pocketable depends on the size of your pocket….  or are you just pleased to see me ;-)

      • Anonymous

        Fits in pocket is one issue.  Fits in hand is another.  The iPhone sells at least as well to women as to men.  Most women cannot comfortably hold a 4.5″ phone in one hand, let alone 5.3″.

      • http://www.asymco.com Horace Dediu

        Consider one-handed use. Draw the arc which most thumbs can reach and you get to the size of an iPhone screen.

      • gbonzo

        Thickness and weight affect that equation. How it feels in your hand, how you hold it etc. What was the right size in 2007 is not the right size in 2012.

      • Anonymous

        People also have different needs and usage patterns, and thumbs are far from being the same size, not to speak of eyesight.

        A small device like a smartphone will always be a compromise. I personally would want to sacrifice thumb reaching convenience for more screen visibility.It took a few years before the original Mac was available with different screen sizes and probably their laptops too (wasn’t a mac user then). I think it’s only a matter of time before a product which is becoming a bigger business than all of Microsoft will be offered in more sizes – at least one more size.I say this with full appreciation for their adherence to principles of simplicity.

      • Anonymous

        I see a lot of children (with smaller hands) use an ipod touch comfortably – so I think a small increase to 4″ wouldn’t be to big an issue.

        Apple might need to to it purely as a product differentiator from the 4S model. Is the A6 chip + LTE enough to entice people up from buying the cheaper 4S? Maybe it is – I’m not sure.

      • http://www.asymco.com Horace Dediu

        What if the iPhone “5″ looks exactly the same as the iPhone 4S and the iPhone 4? This would not surprise me at all.

      • Anonymous

        I think it would be a bit strange if they called it the “5″ if it looked the same (they should have called the 4S the 5 in that case.) Another refresh that looked the same would be called the iPhone 4-something as well wouldnt it?

        Would the iPhone 5 need more than an A6 chip + LTE to get people to buy it over the cheaper 4S? I dont know. Maybe, maybe not.

        Maybe a 4″ screen would be the product differentiator (like Siri is for the 4S vs the 4).

        Its only anecdotal, but in my opinion the mass market is much more excited by new demonstrable, visible features (Siri, Retina display, facetime with fornt facing camera), rather than invisible internal hardware improvements (chip speeds, camera megapixels, HSDPA+)

        Unless you are using a graphically intensive app, its hard to explain the technical differences to people between a iphone 4S & a iphone 4, but showing someone Siri definitley lights up a person face – and demonstrates a significant difference.

      • Rj

        Why are you comparing the consecutive models?  Those that are considering an upgrade are comparing models 2 years apart.  Of those that are considering switching to Apple from some other vendor, does it matter very much to Apple which model they buy, so long as they buy an iPhone?

      • Anonymous

        I would presume that if a person was going to by an iPhone, that apple would prefer that the person buys the high-margin $650.00 premium model rather than the $349 entry level model or even the mid range model.

      • Anonymous

        Another thought – as far as I know, much of the world does not have LTE networks, so if the next phone looks the same and only has an improved CPU + LTE – then for a lot of international buyers that only means an improved CPU.

      • Just Iain

        Horace, I agree on size. “The Devil will be in the details!” 

      • Canucker

        Bigger screens also draw more power. If you look at the LTE vs 3G versions of the Samsung Nexus Galaxy, their batteries are different sizes and smaller than I’d expect them to be (this is because they are removable). Samsung is playing the specifications game, rather than the usability game. If you are in the Android business, this is required.

      • Anonymous

        So I guess it would come down to whether the increase in battery size afforded by the larger form factor would give more extra power than that used by the extra screen size. If yes, then it is a positive to have an LTE phone with a larger screen – if no, then it is a negative to have a LTE phone with a larger screen.

      • http://kaizenity.blogspot.com/ FalKirk

        “Come November 2012 and you will agree, because by then the latest iPhone will surely have a larger screen than 3,5″.”-gbonzo

        I will take that bet. I do not believe that Apple will change the size of their iPhone (or their iPad) screen(s).

      • gbonzo

        iPad is the right size. Smartphone screens are still growing and 7″ tablets are too close to phones.

      • Anonymous

        >As long as it is still comfortably pocketable, a bigger screen is better in devices like these.

        Only if you’re judging form a purely theoretical standpoint. Would a bigger screen be better, if it lowers battery-life? I don’t think so. Every product decision has some compromise behind it and user-expirience as a whole is generally more important than any spec alone. IMHO.

      • gbonzo

        We are perfectly in agreement here. Many things affect the right screen size. Thickness, weight, component pricing, economics, etc. I do not agree with Horace on the point that what was optimal screen size choice for Apple in 2007 will stay that way forever.

      • Davel

        Why do you think the iPhone will come in a different size?

      • gbonzo

        Main reason is screen estate and how that affects internet usage very positively.

        I think the point about thumb reaching only 3,5″ comfortably is not totally true. By juggling a 4″ Samsung in my hand I estimate that I could reach all points of a 5″ screen with my thumb one handed. The far end corner would not be super comfortable, but most of the time I have two hands available anyway. What must be very comfortable is one handed typing and that improves with screen size.

      • Anonymous

        I for one see phones as mainly screens on which stuff is displayed. Same for tablets. I’d pretty much always go for the bigger, then better one (age…^^). My Note as 2.2x the screen area of an iPhone. This expands uses and comfort significantly.

      • Canucker

        That logic means that next years tablets will be 20″. It’s true that my aging eyes have a hard time looking at a 3.5″ screen, but the same is true for a 4.5″ screen (the difference is not substantial enough). I resort to glasses. Perhaps Apple will develop a corrective lens for the iPhone for people like me (that would be kinda neat, albeit optically a technological challenge).

      • Anonymous

        There is a portability/ergonomic limit. I went as far as to make a mock-up of the Note before buying it, to make sure it fit in my pants and shirt pocket (it does). For phones, 5.3 is close to the limit, nless bezels start disappearing. For Tablets, I’m looking forward to Samsung’s rumored 11.6″er. No “fits in pocket” criteria, but “fits in backpack/briefcase” seems obvious ?
        You should try bigger screens. Screen area raises as a square of diagonal (pretty much), so a diagonal increase that seems tiny is a huge boost to area. 4.3″ is 1.5x 3.5″, area-wise.

      • Just Iain

        The weight will be a killer with all that glass unless you can get thinner, lighter and maintain the strength. Who knows, it’s possible. But the implication for tablets is that they won’t fit as well on airplane trays etc. Thus the reason that some are using the iPad for a travel computer rather than a larger or equal laptop. Also that extra screen will mean more battery and so on and so on. You’ll get your wish; it’s largely a question of when.

      • Rj

        Earlier this year, “everyone” thought that the next big thing from Apple would be an iPhone Nano — with a smaller screen — but now “everyone” thinks it needs to be bigger.  If it’s both too big and too small, perhaps it’s just a reasonable compromise?  Niche products might appeal within both options but I don’t see that as a reason that Apple would consider changing their product, which is after all the most popular option.

        Personally, I suspect that Apple will be trying to make the screen go away (either largely or entirely) as they broaden their range.  Not just because they trod this path very successfully with the iPod (until they disrupted themselves with the iPod Touch) but because smaller is more convenient when you don’t have to read.

    • http://www.asymco.com Horace Dediu

      The increase in interest over time is not proportional to the increase in sales volume

      • gbonzo

        I agree and that is what I said, too. I translated 10% search growth to 25% unit growth.

        If you look at the search data history, you can see that searches for iPhone have grown at linear rate and sales volume has grown at exponential rate. This relation has been very stable since 2007. Now that the linear growth in searches has broken, I assume that the exponential growth in sales volume will also break in calendar Q1 at the latest (assuming no iPhone 5).

        This is far from conclusive, but in my opinion there is at least as much data in these search numbers than what you have shown to back up your “continuing at 100% annually” hypothesis. I repeat that my analysis (or guesses really) only applies for iPhone 4S which in my opinion was a bit underwhelming. The screen size has stayed the same since 2007. Apple needs iPhone 5 to continue close to 100% unit growth trajectory and it is possible that they deliver such a thing.

      • http://www.asymco.com Horace Dediu

        My evidence is in CapEx spending. It has grown proportionately to iOS shipments and Apple already forecast next year’s CapEx. Also, since expenditures predate production, they effectively foreshadow production growth one quarter as well as one year in advance. Apple sells as many iPhones as it can build and it builds as many as it can build production lines for.
        Regarding the screen size, I don’t think it will ever change. At least not unless our hands and pockets change.

      • gbonzo

        Ok, so the conclusion from Apple estimates and from real world interest for 4S is that iPhone 5 comes February or March.

      • John Smith

        Or iPad.  You know, just like the last two years.

      • http://twitter.com/Marcos_El_Malo Marcos_El_Malo

        All we really know at this point is that it will likely be on a Tuesday.

      • gbonzo

        “Regarding the screen size, I don’t think it will ever change.”
        That sounds religious to me. I am afraid that when Apple makes the shift to somewhat larger screen size, then you say that the new one is the perfect size. I have seen this type of argumentation before from fans of other products and other companies.

        By the way, three percent of these people agreed with you when asked:
        http://mobilesyrup.com/2011/09/02/poll-whats-the-optimal-smartphone-screen-size/ 

      • http://twitter.com/Marcos_El_Malo Marcos_El_Malo

        It’s a usability issue, as Horace alludes to by mentioning hands and pockets. Three and a half inches is the perfect size for most people to use a phone one handed. Nothing religious about it.

      • gbonzo

        We will see the amount of religiousness in Horace once there is a larger iPhone. I very strongly expect that to happen within a year. If Horace keeps his opinion that 3,5″ in perfect, that is ok. If he changes his mind because of a new product launch by his favourite company, then it seems to be more of a religious issue for him.

        If there will be no larger iPhone, then Apple shares Horace’s view about product sizing and we can conclude that the issue was not religious.

        There are several reasons why Apple should bring a larger screened model. Screen estate is very important. I really think that one handed use is important, but the most important thing about it is to reach the portrait keyboard comfortably. Reaching the far end corner super comfortably can be sacrificed for more screen estate. See the poll that I linked to and you will see that many people agree with me.

      • Anonymous

        Also, the app developer has something to say about where buttons are placed and can make them more thumb accessible by not placing them near the top corners. I’m becoming very convinced that 3.5″ is no longer the magic size. Times have changed and maybe (could it be?) Apple is closing its eyes like RIM did. Nah, they’ll get it right on the next one.

      • gbonzo

        That is a great point. If wanted, Apple can make it a design guideline that top corner buttons should be avoided in portrait.

      • http://www.asymco.com Horace Dediu

        They would have to stop using the home screen, and the search screen, and redesign every core app including contacts.

      • gbonzo

        A larger screen would be an improvement even if the top part of it would be completely black in portrait mode.

      • http://www.asymco.com Horace Dediu

        My only _conviction_ is that 3.5″ is good enough. Being more than good enough is living dangerously. I would not say it’s perfect as there is no such thing. I would say it’s perfectly adequate.

      • gbonzo

        I think Apple wants to polish rocks until they are more than “good enough”.

      • http://www.asymco.com Horace Dediu

        Sometimes but sometimes they say enough is enough. Like enough storage or enough screen or enough speed or enough choice.

      • Anonymous

        Well… the screen size can change in another way… by adding another screen size, not replacing the current. Essentially expanding it’s portfolio, if they see it necessary to sustain the 100% YoY growth.

      • jawbroken

        So, looking at this graph http://cl.ly/3n1n3Z0c031w3s010H0A you’ve come to the conclusion that growth was once linear and is not now? Interesting.

        What about this one? http://cl.ly/0X2E2i0b2O1X2D022U2s

        Or this one? http://cl.ly/1n1A2M0m0b1U3Z3x442F

        Can’t say I really see what you’re saying at all from this data.

      • gbonzo

        Ok, I correct myself, the search index growth has been exponential, but the exponent is just lower than two, something like 1.7 in these figures:

        Year, November search index, growth y-on-y, fiscal Q1 sales volume in millions2007 17 n/a 22008 26 +9 42009 33 +7 92010 57 +24 162011 69 +11 n/a

        The 2011 search index value should have been 92 if the growth trajectory is intact, but it is only 69. The possible explanation is that iPhone 4S distribution was limited in November (and still is), but that suggests that model transition will affect two quarters negatively. Have we seen such behavior before?

  • Will

    If the examples of companies that realized the need to rebuild early all have failed, or close to it (Microsoft, Palm, Nokia), then perhaps it is RIM who made the right move to wait longer. They can come out with a new OS at a time when iOS and Android are standard fare and no longer very exciting. People love shiny new things, but Windows Phone and WebOS were new when iOS was also new so they failed to get attention.

    BlackBerry 10 is coming late and perhaps will be better off for it

    • Anonymous

      The dust hasn’t settled in the mobile market yet.  Yes, Palm is out, but they were small potatoes even in 2007.  Nokia has essentially become Microsoft in that they are not just another Microsoft OEM.  

      RIM’s future is less clear.  RIM has been able to hold on as long as it has mostly because they’ve had lock in at the enterprise level.  Change is very slow in this market.  However, the writing is on the wall.  Even the more conservative companies are beginning to roll out RIM alternatives.  Given the choice, I think we’re seeing execs beginning to drop Blackberry in favor of iOS / Android (mostly iOS).  Financially, RIM has challenges ahead.  Windows Mobile is small now, but Microsoft clearly has the staying power to see their platform grow.  It’s not hard to see Windows Phone move into the #3 spot in just a short while.  In my opinion, Windows Phone is better quality than Android.  If OEMs really start to embrace Microsoft again, don’t be surprised if this comes at the expense of Android.  As security becomes a more important issues, expect iOS and Windows Phone to benefit at Android’s expense as well.

      • Shameer M.


         Nokia has essentially become Microsoft in that they are not just another Microsoft OEM. ”

        If they’re not just another MS OEM, I’m curious, what are they? Because that’s what I see Nokia as now.  The only way Nokia can differentiate themselves now is through hardware design & cloud services such as their mapping & music service.

      • Anonymous

        Sorry, typo on my part.  That sentence doesn’t even make sense as written.  I meant to say “Nokia has essentially become Microsoft in that they ARE just another Microsoft OEM.”

      • Walt French

        “…Microsoft clearly has the staying power to see their platform grow.”
        Unfortunately, Microsoft also has the staying power to be Aesop’s rabbit: sitting, filing its nails while the tortoises in this race are in the race for their success or failure.

        If Mango is competitive, Microsoft should be out-advertising everybody else. But while I’m now actually noticing the little Windows logos on phones in store, it sure seems that the major US carriers are touting Droid and Apple brands MUCH more heavily. There’s obviously no co-marketing from Microsoft, leading to the suspicion that Microsoft’s Marketing Dept KNOWS it’s not ready to compete head-to-head with the others.

        Regards OEMs shifting back to Microsoft: actually, they ARE ALREADY producing Microsoft phones. They’re just not selling. Having a slightly lower licensing fee means bupkis if the volumes are zero.

      • Anonymous

        The carriers don’t seem to be pushing Microsoft at this point.  I’m sure part of it has to do with popularity for sure.  However, I’m wondering if the carriers make more profit per device for Android phones, etc.  What would be the carriers incentive in this either way?  Their deals are with the OEMs rather than the OS vendors, right?  Do the OEMs have more incentive for Android to succeed than for Microsoft to succeed?

      • Tatil

        Carriers can customize Android. Whether the results of these efforts are attractive to customers or not, they would rather have that opportunity and make some side deals for streaming content or search engines. If the customers want a well polished product, they offer iPhone, they don’t need to carry another one until the customers start asking for it by name. MS does not have experience in marketing directly to customers, except in the case of Xbox, which does not require going through OEMs. 

      • Sander van der Wal

        Operators would not mind having a third or even a fourth platform. Divide and conquer. If Microsoft has a viable alternative to Android or iOS then operators will push devices based on that platform.

        But first Nokia has to use all that Microsoft money to do their own advertising. The Lumia is being advertised heavily in the markets is has been released for.

      • Davel

        Microsoft should take some of their money and bribe the carriers. I haven’t seen that yet, perhaps they don’t understand how phones are sold.

        They have done a good job at copying Apple’s model without the success, but they also do not have the direct customer relationship that Apple does.

      • Anonymous

        > Regards OEMs shifting back to Microsoft: actually, they ARE ALREADY producing Microsoft phones. They’re just not selling

        Maybe because most of those phones are bad? And it’s not enough WP7 phones in the market to sell bad stuff. Every WP7 I tried is rather mediocre — the Nokia Lumia 800 seems to be the only exception to this.

    • jawbroken

      Seems like very wishful thinking. To me it would seem far easier to attract customers that have never owned a smartphone than to convince them to unentangle themselves from whatever ecosystem they are tied up in and switch to you. Meanwhile, their currently loyal customers are leaving their platform in streams.

      Not to mention that, with phone contracts the way they are in most places, it will be 2 years from your initial push until everyone in the market is even in a position to think about your platform.

  • http://www.facebook.com/people/Dave-Wright/100002464860605 Dave Wright

    I agree that the interface and OS development platform revolution by Apple and Android upset RIM’s apple cart and should have justified a faster response.  However, another major change was that the iPhone and Android handsets were targeted at the consumer, leveraging the iPod/iTunes and google ecosystems respectively.  RIM was very much a company focused on the business user.  With the iPhone, the smartphone market quickly shifted from a strict focus on business communications (RIM) to general consumer use with business use over the top.  I think that may have been the more difficult change for RIM to adjust to.

    • Davel

      When RIM got popular they were product focused on the consumer too. While I agree that their strategy is geared towards the enterprise it seems they haven’t done anything new in that regard in years.

  • http://www.acid-product.co.uk Ian Davies

    Steve Jobs’s comment about being 5 years ahead of the competition becomes more and more interesting to me. Most people (including me) assumed that he (just) meant technologically, and as a result many thought he was being optimistic at best while others openly scoffed at what they saw as another example of Jobs’s hyperbole. It becomes increasingly clear that he was also talking about being ahead with execution and having a sustainable business worked out too.

  • Canucker

    Watching RIM’s descent is a little like rubber-necking. I shouldn’t be looking, but its compelling. In Canada, there is considerable soul-searching as RIM is held up to be a technology winner and model. I do think its appalling inability to get its act in gear is related to management.  The company was set up by two entrepreneurs.  Lazarides, the engineer, dropped out of university and slowly built up a business that, initially, had nothing to do with the products that now define the company. They locked onto two way messaging and by working out how to push notifications, really found a winning technology. Their subsequent integration of telephony was done quite well (they understood that it wasn’t a case of just adding phone circuitry, but that there needed to be integration with address book, etc). They also understood the importance of security. However, the iPhone totally blind-sided them in three ways.  Firstly, they didn’t believe the technology was there. Supposedly, when they tore down an iPhone they were surprised to find it was a battery with a tiny circuit board. Secondly, they, as smartphone pioneers, felt they were the leaders in this field and that they had a unique insight and a multi-year lead on everyone else. They felt no one could replicate their model and they were close to perfection. This arrogance was bolstered by increasing sales and expanding markets. Thirdly, they saw Apple (and Google) as irrelevant. RIM’s business was build over a decade and they deemed the market relatively mature and themselves as king of the hill. 

    The two co-CEO’s may even have modelled themselves on the arrogance of Steve Jobs.  They were self-made, had more successes than most major sports teams (let’s not mention Balsillies distraction with the Phoenix Coyotes) and were making money hand over fist. They were self-deluded, isolated and, worse, the bottom line numbers offered comfort in their delusion. Their attempts in meeting the challenges were half-hearted (the notorious Storm) and self-defeating since they viewed touch-sensitive input only “as satisfying” the rare idiot that didn’t appreciate the much more efficient keyboard input. Rome wasn’t yet burning, but the suburbs were smouldering.

    The most obvious sign of delusion was the PlayBook. The acquisition of QNX was a good move, albeit late. However, the hubris around the PlayBook was embarrassing. Produced in response to the iPad and seen as a means to not only cement the loyalty of BlackBerry owners but to massively expand their earnings in a new category, they saw the PlayBook as a winner.  It was pre-announced repeatedly when clearly the technical work was struggling.  It was prematurely launched at a ridiculous price. It was embarrassingly advertised using features that no one really cared about anymore.  The disconnect was so huge that they not only over-produced the PlayBook in anticipation of massive sales, but locked into supply contracts. Hence the massive $485 million write-down this last quarter.

    Has the company learned? I thought a saving grace of the PlayBook was the experience they gained on developing for QNX but, instead, it looks as though that actually detracted them from their Job #1 – QNX powered phones. Moreover, after the firesale at $199 for the 16Gb PlayBook, they are back at $399 or so. Hello? The lousy Amazon Kindle Fire looks like a PlayBook, is not as powerful, and sells like crazy at $199.

    But is RIM dead? At $14-15 a share,  it’s astral for speculators. They still make money, have 75 million subscribers and something like a plan for the future. They need to downsize, reduce their costs, consolidate products and focus on success. Their bare assets are not worth book value but as a going concern, there is promise. That sounds to me like a company ripe for a shareholder revolt and acquisition by a management company that will restructure RIM looking for a relatively quick turn in investment. It’s a risk, but the sooner it happens, the better for shareholders. The current model is fundamentally broken and as Steve Jobs famously joked about Gil Amelio, they are trying to change the direction of a sinking ship.

    • Tatil

      I doubt a management shake-up would make much of a difference. 2 years ago it might have, but not now. There is not enough time for the new management to try a different OS, they have to make QNX, BBX, BB10 or whatever they decide to finally call it, work. Playbook was rushed to market, for sure, but that is water under the bridge. There is not much the new management can do now. It is not like there is lack of focus at RIM, where some product lines can be pruned or the product design needs a little more of a perfectionist attitude. If the fear of imminent death is not motivating the employees do the best work they can already, I doubt the new management can do better. 

    • http://www.asymco.com Horace Dediu

      I suspect the reason the company is so cheap now is that management owns too much of it and may be difficult to dislodge.

    • Davel

      I think you should run the company. You seem to know more about what the problems are and how to fix it than they do.

      I whole heatedly agree with both your description and the solution. Phones are their core and they need to fix that. They have development resources invested in both the legacy system and the new one which dilutes the focus. They need to make QNX work and they need to think about who they are, what works and how to extend it.

    • Anonymous

      I’ve only followed RIM casually, but my sense was that something was wrong when RIM started to chase emerging markets while dismissing weakness in their core home markets. People used to dismiss the US as a cellphone backwater, but after the iPhone, the US market seemed to be a harbinger for other markets. If only they had tried to understand the weakness in their core home markets and didn’t try to paper over the cracks by focussing on how well things were going in S Africa, the Mideast or Brazil.

      • Canucker

        Agreed. There are other markets and RIM is doing well in them, but they are not substitutes for the North American market. That may sound arrogant but that is where they started and to cede this ground is to turn your back on your founding principles for success. The company is simply not built to compete at the lower end of the market, which is what they are chasing. It will need significant restructuring to support lower ARPUs. The running costs of the server support systems will not scale down and so there will be legacy costs. The various RIM reports have focused on the mirage of growth for growths sake, rather than margins and market awareness. More importantly, RIM built up good relationships with carriers around the world and catered to their whims. Carriers now advertise the BlackBerry models along with the non-descript Huwei and generic no-name phones and this further reinforces the idea that BlackBerry devices are no longer on the technological edge.

        More than anything, it’s the recurrent ability of RIM to manage to disappoint even the most ardent followers. What’s the next disappointment? QNX is simply a kernel. It is a necessary platform upon to rebuild the BlackBerry OS but the transition should be invisible.  RIM is now building up these phones to be somehow transformative. Instead, they will be incremental and will need time for the software to mature – that’s simply the experience of any OS and there is no reason to think that RIM will perform better than anyone else in this respect…. It might be argued that they’ll be able to hitch a ride on the Android app ecosystem but I think that is a false hope in that it will actually undermine the quality of the BlackBerry experience. These apps will be designed for Android devices, plugging into Android optimized hardware. Will this approach not tempt BB owners to try Android devices – to get the “authentic” experience? There is a chance that RIM can still pull out of this stall, but it will take  a lot more patience on behalf of the disgruntled shareholders.

  • David W.

    I’d like to comment on your bit of your post about Unix Like operating systems. I’m a Unix guy, but there is nothing that special about Unix. It wasn’t written in stone by God Almighty (actually, the first version might have been a stone based OS). What makes Unix based operating systems so dominant is the fact they don’t have to reinvent the wheel.

    Apple used BSD because NeXT did, and NeXT did BSD because it was already written. Android used Linux for the same reason — it was already available. And, that’s the true power of the Unix style operating systems — you don’t have to reinvent the wheel.

    We can see this advantage when Microsoft rewrote Windows as Vista. It took over five years, and even then it was incomplete. Meanwhile, Apple was able to put out 5 OS updates and rewrite the entire OS to be touch based.

    • http://www.asymco.com Horace Dediu

      Yes, that reusability is a clue that it was good enough and it was scaleable, or conformable. What’s special about Unix is that it’s not special. All the others were very special.

    • davel

      I disagree.

      Unix is special. It was written almost 50 years ago and it is still going strong. It is simple and flexible.

      This allows it to easily be adapted to new purposes.

  • Anonymous

    My impression of history was that Android was originally designed to be a RIM competitor, in other words a keyboard and small screen style UI. Android was then acquired by Google and after a “sneak peek” at Apple’s upcoming iPhone UI they scrambled to redesign from the ground up, thus managing to offer a modern touch screen smartphone sooner than most.

    I wonder if they hadn’t gotten that early view of Apple’s developments whether they would have first come out with a more normal phone and would have had to reset themselves later just like Microsoft, RIM and Nokia.

    I also wonder how true this version of history is. The sneak peek I’m referring to is via Eric Schmidt, then the CEO of Google and a board member of Apple. The event led to his departure from Apple’s board and much resentment from Steve Jobs.

    • http://www.asymco.com Horace Dediu

      Actually Android was acquired as a hedge against Windows Mobile. In 2005 that was a clear and present danger. A threat of control over the primary access point to Google’s services. That danger shifted to being RIM and later to iPhone. Android is and always was a defensive strategy.
      I don’t believe they reacted to the iPhone until it became a market force. The reactions are not to technology but to market strength which could destabilize Google’s business model. Put another way, Android will morph into a commoditized version of whatever emerges next as a potential threat.

  • KAJoneslaw

    Horace:  

    I really appreciate your site and podcast.  This entry reminds me of an article I read roughly a year ago.  It was by a former Apple employee that had been tasked with researching why companies fail.  He pointed out that tech companies (Atari, Gateway, now RIM)  chased late adopters by trimming margins in such a way that the coming disaster could not be detected in the bottom lines.  By the time disaster was clear (ie they were suddenly losing money), they were already dead and over the cliff.  That article led me to your site. 

    I very much want to review the article and cannot find it.  

    Would you happen to know it or where I could find it?

  • Walt French

    Horace, I’m a bit surprised that you’ve focused on the Unix underpinnings of modern phone OSs, given that you’ve emphasized business model disruptions — Google undercutting Microsoft’s value stack by giving away the OS — and UI disruptions — chiefly, multi-touch.

    • http://www.asymco.com Horace Dediu

      The question that’s been bothering me is why RIM hasn’t done anything about their crufty old code for so long. In the framework of analysis one would think that RIM would have done at least the bare minimum to sustain its core. I’m asking in the last paragraph if their failure at even maintaining hygiene is a symptom of the bigger disruption they are suffering from. Taking years to act and years more to implement means that they are really falling asleep at the switch and that seems so improbable.

    • Anonymous

      The technology still matters, though. The Internet runs on Unix, and the Web and most everything else run on the Internet. If the Internet is central on a device, the device gains a lot of advantages if it runs Unix. So many advantages that devices that lack a Unix-like system cannot compete with devices that run Unix-like systems. For example, look at iPad versus Windows PC’s: OS X is on ARM for many years now, it jumped right over like you would expect from a Unix, but NT on ARM is still years away. Another example is the lack of security and reliability of Windows compared to OS X.

      So what you have is NT PC’s and baby software proto-smartphones both getting replaced by Unix.

      • Davel

        Next OS was made processor agnostic many years ago so a leap to ARM was not hard.

        What advantages does Unix have that makes the Web better? I don’t see it.

        Every OS can handle TCP/IP, most of the web is based on web servers like Apache,IIS,Websphere, etc.

        Comparing Unix to Windows for portability is unfair. Unix from early on was ported to many different computers, including mainframes. Windows has only been on Intel with the aborted exception of the HP RISC chip.

      • Dan Woods

        The Internet relies on the inteorperability of Unix, which is more of a methodology than a Implementation. That is why modular non-unix components (like Microsoft’s Azure, IIS and Windows Phone 7) are more effective than monolithic components (like Android and BlackBerry), even when the later uses some form of Unix Kernel.
        Unix isn’t just the Kernel of the OS. It is the whole architecture. You can’t just dump something like Dalvik or OpenOffice onto a Unix kernel and call it Unix. By forcing a monolithic environment, it is no longer Unix.

    • Davel

      That struck me as well.

  • http://antoinerjwright.com Antoine RJ Wright

    Been a while since commenting here, but the last lines of this pulled me from the covers some…

    Maemo was Nokia’s attempt to change their business model in a very drastic fashion. By turning into a “mobile Red Hat” of sorts is what that seem to be doing. First, by the (correct) assumption that the best of what mobile had to offer needed to be malleable to personal and services oriented experiences. For them to do that, they needed to change how they built platforms, and hence the caul dipping of their toes into open source, Agile, and even relationships with MS and others. For them, a heck of a painful change, and one they started in 1999 it seems. Of course, we’ll never know if that could have been successful, as they changed to a more controlled (PC-like, I’d argue) model for platforms and devices.

    Palm wanted that PC-like control. It took a long time to wrestle solid developer tools from them, though they had a good strategy for making garage/basement developers into solid enough brands. What they couldn’t do is move fast enough. Ever since OS4.1, they played catchup to better funded partners and competitors. I some respects, the introduction of the M500-series was a note of it being only a matter of time. The Treo lineup while quite successful for them, exposed this point all the more.

    MS seems all too plagued by management over functionality when it came to Windows Mobile. Going forward, I don’t know that their designers/prosumer focus will keep them in mobile as much as it will make mobile spread thinly to their other more profitable streams. Their mantra, three screens and a cloud, tends to keep a very open door on that third screen. Me thinks they think higher of auto screens than they do mobile.

    Despite Apple’s success in making in a profit, I wonder for them as well. Will mobile be the key component or just a thin layer by which they maintain some sense of forwardness. It’s probably true that they can’t maintain this momentum, and given the fickle nature of analysts and markets, any sign of dropping by them, whether or not they reinvigorate an established genre or not with their next shift in 12-18 months, will be interesting. Like Nokia, they pushed out their prowess in design and operational planning to an advantage, and like Palm, they made sure to culture and mature communities where there weren’t any before, and like MS, they are using mobile as a bait to their other endeavors. Using the strengths of all can also point to a weakness.

    I think Google has well seen this, and RIM wasn’t good enough operationally to navigate away from it. Products can only matter for so long, then markets, men, and machines have to be willing and quickly do the evolving needed to survive. Even us who opine on these matters have to come to that truth.

    • Davel

      Mobile is driving Apple. It is core to who they are now.

      What does pc like control mean?

      I think Palm just was not big enough and integrated enough. Many liked the software, but felt the hardware was not good enough.

  • Noah Berlove

    Back in 2005 corporate mail servers could not provide many of the services provided by BES (e.g. push email and remote wipe).  By 2007, Microsoft had added may of these features to Exchange, but it took time for the installed base to upgrade.

    The original iPhone was a very poor messaging device, nothing to threaten RIM’s base.  However, in 2009 Apple added ActiveSync and Exchange support to iOS and the 3GS.  They also (finally) added MMS and app developers added instant messaging.  By this time, just about all installed Exchange servers supported the more advanced email features.

    At this point, the iPhone could do many of the things for which Blackberries were best known.  Maybe not as well, but arguably, well enough.  I suspect RIM only really started to feel the impact of the iPhone after the 3GS was released.

    If you turn the tables and look at what an original iPhone was really good at (web browsing and media consumption), RIM has not done nearly as much to close the gap.  Its now almost 5 years since the iPhone was first announced and RIM has not only not caught up, but has fallen further behind.  Its hard to play catch up when your competitor is moving forward so quickly.

    • http://www.asymco.com Horace Dediu

      Everything that the iPhone does now was foreseeable. Why didn’t RIM act? To use an analogy Canadians are probably familiar with, why did they not skate to where the puck was going?

      • Davel

        Because they were arrogant.

        They should have seen the marketshare advances and looked at their platform and extended and enhanced their strengths.

        They also laughed at the touch interface and did not get a handle on that technology quickly enough.

      • Cpnd2003

        …because they thought they had the puck. :-)

      • Canucker

        The second worst thing a leader in a race can do is to look back. The worst thing is to not realize that the racetrack has taken a different course to you.

      • Canucker

        The second worst thing a leader in a race can do is to look back. The worst thing is to not realize that the racetrack has taken a different course to you.

      • Diskground

        they got hit by the puck

      • Anonymous

        They were playing the puck on a different rink.

    • Rayw

      Darvel has it right ….they were really full of themselves at the time one exec (the IR Hack named Kavelman, since departed) quipped  … iPhones get people
      thinking about smart phones… I want to buy them [Apple] a drink.”
      (Kavelman)

      By Fall 2007 Jobs had already said “the smart phone of the future will be
      differentiated by software” but RIM in my opinion was still just a ‘one trick pony’ – it did the MS Exchange Server/Outlook integration better than anybody else but by that time most CTO’s with any smarts were seriously looking at the Cloud. A weakening of this  Outlook relationship was not hard to predict. 

      All of this was being underscored by the absolutely humongous Gorilla-in-the-room that the industry had never seen – a combo Nervous System & Blood Stream that would hook together all of the well-established cell phone components on a packaged platform named Android and it was FREE! 

      RIM was oblivious they were still playing the more buttons, better screen, better camera  card as their preferred path to market share growth. They were still surfing the Big Wave    and drunk with that success, the IPhone was driftwood and Android was in another ocean… but beaches are a bitch.

  • http://www.facebook.com/profile.php?id=741717344 Dick Applebaum

    Horace,

    I know this thread is about RIMM…

    But the other shoe just dropped on Siri:

    Siri now lets users access the entire Best Buy product catalog

    http://9to5mac.com/2011/12/16/siri-now-lets-you-access-the-entire-best-buy-product-catalog/

    To me, this means that, in the near future, Siri can be used for much, much more than what she does now.

    For instance, Siri with a little knowledge of you, her Boss, can become your personal shopping assistance.

    “Siri, find a birthday gift for my wife”

    Siri:  ”I found this lovely necklace that picks up the blue in Lucy’s eyes….”

    “Siri, That’s it… buy it and have it delivered to my office…”

    Now, take that to the next step… which is sitting there in pain sight…

    Talking to Siri on the AppleTV…

    Not only can Siri be used to find and deliver content…

    Siri can be used to buy things…

    TV Ads/Commercials (the underpinning of the current Broadcast/Cable/Satellite ecosystem only tells you what goods you should/can buy — Siri will buy them for you.

    What content delivery/advertising provider wouldn’t want to be able to participate it that?

    I believe that this is what SJ meant when he said he “cracked” the TV problem.

    I suspect the CableCos, et al, will be lining up to get Apple to run their content through Apple’s STB… the AppeTV… sitting there in plain sight!

    • Davel

      I think you give Siri too much credit.

      • http://www.facebook.com/profile.php?id=741717344 Dick Applebaum

        Perhaps…
        But, Siri comes from a good family, and is like a young debutant who is waiting to make her mark on tsocietyJust consider this, your CableCo knows:– to which locations (GeoCodes) it provides service– the date and time the services are provided– the type of service (content or advertising) being provided– the exact frame of any content or ad being shown at any moment of time– the ID of each customer (household or business)– the ID of each  service outlet (the STB)– the content or advertising that is being displayed on each STB– a measure of attention of the viewer, passive/active,  by interaction with the STBSuffice it to say, your cable has the means to know: who you are; what you’re watching; how interested you are.In simple terms, the CableCo needs only to log changes on the STB.  A full log record might look like this:| CableCo | GeoCode  | SubscriberID | Date/Time | STBID  | Channel | Activity |Actually, it only needs to log the variable data, and only when it changes.

        | Date/Time | STBID  | Channel | Activity |

        So, the CableCo logs your activity and puts it into a database.

        Now, suppose the CableCo comes to Apple an says we want to use Siri to improve the shopping experience for our subscribers and our advertisers….
        We want to be able to find, view and schedule shows as you might expect…But we want to do more… We want to allow our customers to find ads, to shop… Not only shop but actually buy things.Two simple examples:1) watching the football game and an ad for pizza comes up.  You say to your Siri remote iPad:”Siri That looks good”Siri: sends the menu from the pizza ad to your iPad (the TV continues to show the game)By voice and/or touch you make your selections and Siri completes the transaction.2) Later, you remember that your wife perked up when an ad for a jewelry pendant appeared on the TV…Out of your wife’s earshot you say;”Siri yesterday I saw an ad for a diamond pendant on TV”Siri:  ”Here’s a list of the Jewelry ads viewed in your home yesterday… They are sorted by type of jewelry”As desired you complete the transaction using Siri.I am assuming that any transactions are handled at the Siri Store — analogous to buying an app or a song.What just happened there?Does the above series of interactions and transactions (all logged and sumarizable) have any value to:– the viewer– the shopper– the buyer– the seller– the manufacturer– the advertiser– the ad agency– the ad creator– the content provider– the content creator– the show planner/scheduler– the CableCoGee, now, if only there were a service that could aggregate this data with other known demographics…Sent from my Siri remote

  • r.d

    I don’t think delay is QNX.  RIMM has to give an alternative to Java.
    With Playbook, they tried Android emulation, AIR and HTML5.
    Java has been stagnate since 2005 also.
    They may be going with deeper Android 4.0 integration.
    RIMM also objected to WebKit Trademark by Apple.
    I wonder what RIMM executives said once they saw SIRI.
    I am sure anecdote will come out soon.

    • Davel

      Why do you think RIM want to do a deeper integration of QNX with Android?

      This would make them totally dependent on a competitor which is killing them without actually having the benefit of being Android.

      • r.d

        because affectively Android has beaten Java.
        RIMM needs an App Story. QNX is equivalent to Linux.
        They need higher API to compete.
        They also need cloud services.
        If Amazon and Facebook can take Android and do whatever they want
        then RIMM sure can to especially when they are already marketing
        Andoid apps.  
        Then again RIMM could partner with Amazon can get cloud and media
        immediately.

    • Dan Woods

      Linux + Java is causes the same problem with Pre-2007 Phones. While iOS has a Modular Unix-like design, just like WebOS, Java-based Smartphones still rely on a monolithic approach. ICS has created a much more stable modular structure than previous versions of Android, It still seams laggy compared to iOS and Windows Phone 7.
      It is ironic that Windows Phone 7′s architecture is more modularly Unix-like than Android.

      Blackberry 10 to be following the same path as Android. Instead of using the existing architecture of QNX, it appears that they are just slapping a monolithic Java-based App Engine on top of the QNX microkernel. The production delays they are experiencing may be caused by the fact that they are having to abstract more and more of the OS out of Java and back into native QNX subsystems in order to make the device usable. They don’t have the brains-trust that Google has so it’s not something they can speed up by throwing more man-hours at it.

  • Neil Taylor

    Do we think that they have realised that Siri could be the next disruption and should they switch their focus straight to voice recognition?

    • Davel

      They may have been dismissive at first, but if they still are they are stupid. All the players laughed at the iPhone. Some no longer exist, others are losing their right to exist.

      I think Google with their data can see the future. I just read where they will release something soon. I don’t think it will be like Siri, but they can certainly do a voice command and control layer to the UI without any ‘assitant’ feature.

    • http://www.asymco.com Horace Dediu

      Voice enables more than a new interaction method. It enabled an integrated service platform. That spans outside the boundaries within which RIM currently exists. To capture the value, RIM needs to expand greatly into hosting and syndicating additional services. It may be possible but they need to think about rebuilding their network operations center to be much more than messaging.

      • Vinu Yamunan

        While voice does open a new interaction frontier (not necessarily an innovation) – it also opens Apple up to a lot of variability in the use, quality and essentially, the user experience. This is something they have consistently shied away from – case in point – the app store and their ‘standards’ in admitting apps to the ecosystem. In the long run, I see Siri as an experiment on a well established platform. perhaps the refined product/service that this iteration of Siri results in will become a core part of a future product or service.

  • Anonymous

    What would be more germaine is writing about how the broken patent system is being abused by large corporations and how Apple is very aggressive in pursuing claims that once discussed in court show just how perverted the patent system has become. The latest ITC ruling in favour of Apple on 2 claims from one patent highlight this well. 

    • http://www.asymco.com Horace Dediu

      RIM was the victim when the “broken patent system” was abused by a small corporation called NTP. $612.5 million was transferred to NTP on the basis of a patent that was judged invalid by the patent office. http://en.wikipedia.org/wiki/BlackBerry#RIM_patent_infringement_litigation

      • Anonymous

        So continuing your response as a narrative – so in your opinion the patent system is not broken and abused?

        From Florian Mueller

        Also, out of ten patents originally asserted, Apple finally prevailed on only one. Apple will need a higher “hit rate” in the future, and it will have to enforce patents that are greatly more impactful than this one.Out of ten patents originally asserted, Apple finally managed to enforce one, and it’s one of medium value.

        Looking at the claims itself there is prior art – hyperlinking was used well before the date of the patent in question was filed. 

        The Apple strategy is quite simple – not many can match its ability to fight dubious patent claims as a means to cower the competition. If these claims were as strong and useful as claimed then why hasn’t Apple gone after MS and other companies using this tech. In WML you could create a link that once you clicked would open the dialer and call the number. 

      • Anonymous

        Now we have the stupidity of Samsung making a claim against Apple over emoticons. 

      • http://www.asymco.com Horace Dediu

        I have no opinion on the patent system. I’m don’t know enough about the patent system.

      • Anonymous

        But it is a strategy that Apple is pursuing aggressively in its numerous cases.

        I am not sure but it seem from the comment above you have not posted about Apple patent cases so is it your opinion they have no material impact on Apple?

      • http://www.asymco.com Horace Dediu

        I spoke about it on the podcast called The Thermonuclear Option. I don’t think litigation IP or otherwise forms the basis of strategy. It’s not something that should influence primary decisions. It may be material or not, but that’s not something that I choose to analyze.

    • berult

      The patent ‘narrative’ addresses mindshare. It’s on the whole a PR stunting operation that has little bearing on ‘in-house’ creativity and productivity. The Court systems and their highly subjective appreciation of patent laws and regulations, their hearing cycles and timelines, make it a quasi non sequitur in terms of mandating  a Justice-for-all leitmotiv to implement a business strategy.

      An enterprise based on innovation has to develop and exploit a ‘profit share’ narrative to reflexively auto-finance its peculiar and demanding strategic mindset. One has to appreciate litigation for the abstract and rather stealthy dimension it pushes on a very rigid supply-demand market place.

      Litigation plays to the market psyche. It’s simply energy-management inefficiency to expect ‘moreover’ out of ‘nonetheless’…

      • http://pulse.yahoo.com/_XHEJMHH2ULDS22G37EYOLMKHYQ Florin Jurcovici

        Beeeeeeep!!! Buzzword abuse! Which sort of renders this comment worthless, IMO.

      • Gerry

        Agreed. I have no idea what beruit is talking about.

      • berult

        In all deference, where I tread ‘buzz wordily’, you thump ‘buzz sententious’.

      • berult

        IMHO

    • Dan Woods

      Apple is using the Patent System to prevent pretender devices.

      A Vanilla version of Android doesn’t infringe on any of these patents, and without any crapware, is almost as good as Windows Phone 7 or iOS. Unfortunately, OEM’s are bundling their own crapware (or packaging, in the case of the Galaxy Tab) in order to trick consumers into thinking they are getting an Apple Device. *That* is why they are getting sued by Apple.

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  • Unkown NA

    Changing the OS for RIM wasn’t the issue it was simply that they didn’t keep up with the times I love my blackberries have done for years but i use them as business device’s which is what they are designed for. The problem RIM had was they didn’t seem to relies that consumers were starting to buy smart phones and they didn’t care so much about security and the quality of the speaker phone, RIM actually spent tons of money tying to create the best speaker phone in the world for there phones which is great for the corporate world at the time but it just wasn’t needed for the general public. Then you have the iPhone that came into the market with the full financial backing of APPLE who quickly jumped on this new smartphone for the everyday person idea although they weren’t the first they did seem to get it right. As for the touch screen idea look at the current OS7 sales figures you will notice that the blackberry community HATES touch screens they really really hate touch screens not just because the storm series was so bad which is kinda was although it did show RIM was capable of innovating but because  the blackberry keyboard is so good and far superior to anything else on the market today.

    Thats my little rant for today :p but i must say this is the first article i have read that picks on RIM and actually gives the stats properly usually they just say blackberry is dying as sales fall in US like the US is the only market in the world, its one of the smaller markets in the world really well compared to India and China.

    • http://www.asymco.com Horace Dediu

      BlackBerries are no longer used primarily as business devices. The vast majority of sales for more than one year have been to consumers. Mainly teens and people in developing countries who use the BBM service to avoid pre-paid SMS charges.
      But the consumer market was always the largest market. RIM came quite late to it. It was a conscious decision when they launched the Pearl and other consumer sub-brands. This success is not often mentioned. Few companies move from enterprise to consumer effectively.

  • Tom Hagan

    Siri is speech in/speech out, and the most impressive results don”t use the local  phone’s  computer capabiliies at all.

    So what difference does it  make what OS is on the phone?  Why does it even need an OS? Wouldn’t Siri work just as well on any old phone? 

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  • Enrique Santa Cruz Polanco

    after
    several years of being a loyal blackberry user, I switched to a droid Razr. My
    last phone has a torch and a week after I bought it I was already ashamed that
    my sister’s iphone was so much better. Yes, is a pain in the neck to synchronize
    with outlook, bb was much better there, but everything else is at least 5 years
    more advanced in the razr. I will miss my black berry messenger and seamingless
    integration with outlook, but the ability to watch a movie located in my laptop
    in the phone through motocast is really worth it.

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  • albee

    RIM’s QNX delay till late 2012 seems more like their traditional buy in bulk policy rather than anything else. They could make a new phone today because the phone is pretty much the guts of the playbook which they’ve had out for a while.

    However if your look at RIM’s business model for selling handsets over the last 5 yrs you’ll notice that they hardly EVER change the core processor / chipset of any of their phones. The Bold, Curve, Torch etc.. I think have all had pretty much the same processor for the last 5yrs with just upgrades in memory and software. Their marginal cost of production must be ridiculously low because while their competitors are buying new chipsets every 6 months they seem to be using stock from the previous 2/3 years and just making new cases / updating software.

    That explains why they can do all these 2 for one promotions and heavy discounts for enterprise. Their products are pretty cheap to build in the long run.

    I suppose RIM are just waiting for the chipset that will allow them to buy in bulk for the next 3yrs worth of handsets. Normally this has made sense. However, I think they are gambling on holding their markets outside the US over the next 12 months.At the same time they most be wary of a hostile take over because their assets are now more than they are worth as a company on the stock market, which makes them an attractive buy. Its only the global recession that has stopped a takeover already as takeovers without a clear strategy by the buyer will be frowned upon at this time.

    At the end of the day, I think RIM are really running out of time. Someone is going to fork android and make it super secure and put their own RIM like handset together and its game over. The only reason RIM has any market share now is because of its keyboard and BBM (and the Curve is dirt cheap), But pretty much every kid in the developed world wants their next phone to be an iphone (or at least Android). We already have Whatsapp and a whole load of BBM type messaging. RIM’s brand is the biggest thing its got going for it. It really has to make that brand stand out again. Its getting dragged through the mud in the press and that will leak on to the street. Bad news travels fast.

    Companies like RIM and MS are dealing with the new smart phone “momentum”. The momentum is that your phone is now your mini personal computer that happens to make calls and text people amongst other things. Right now the iphone and Android phones are synonymous with these devices and that is all the consumer knows. The consumer in 2012 doesnt want a mobile phone they want an iphone or android system. You are now looking at the accumulative effect of billions of dollars of promotion over 5 yrs from Apple and Google. As Microsoft are finding, when the customer gets an idea stuck in their head, its almost impossible to change (ask Apple about their struggle convincing customsers than Mac OS was better the Windows.. didnt matter, no one cared!).

    I really think the momentum of change in developed countries is insurmountable. I dont see RIM, Nokia or MS having any type of power in the new mobile space. They are wedded to old business models and practices and have failed to really identify the modern consumer. You cant sell something to someone if you dont know what they want. Its clear that RIM, Nokia and MS dont know what the customer wants right now.

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