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RIM to give up

RIM’s CEO, Thorsten Heins was quoted as saying, “We plan to refocus on the enterprise business and capitalize on our leading position in this segment. We believe that BlackBerry cannot succeed if we tried to be everybody’s darling and all things to all people. Therefore, we plan to build on our strength.”

via RIM to give up most consumer markets | Ubergizmo.

RIM’s latest quarterly results show a continuation of the decline in sales that began in Q1 2011.

Here are the highlights:

  • Smartphone units declined 26% y/y and 21% sequentially. Over a four year period the company still shows a positive growth of 20% compounded, though that is far below industry average
  • The smartphone revenues were down 29% y/y and 23% sequentially.
  • Including service revenues, the revenue per smartphone dropped to $346, a drop of 4%.
  • I estimate the phone operating margin to be less than 5%. The company swung to a net negative operating margin due to write-downs of tablet inventory but the phone business managed to break even.
  • Operating income from phone operations dropped to the lowest level in five years.
  • The company is still generating cash flow and has a cash reserve of over $2 billion.

Seen in isolation, the company is clearly struggling but does not seem to be on its last legs. But no company should be seen in isolation. As part of a competitive market, the company is in far worse shape. The following chart shows the AMP index which measures relative performance through a blend of market shares.

This chart does not include the latest quarterly data but if it did it would be sure to show a continuing decline. The AMP index actually shows RIM peaking in Q1 2009, well before the volumes peaked.

It’s within this context that we need to evaluate the new CEO’s strategic shift. In the quote above we have the first significant strategic departure and split from the past. Should it inspire hope or despair?

The idea of focus has huge benefits. Focus and the art of saying no are keys to greatness. However, you only succeed if you focus on the right thing. “Enterprise” is not the right thing. It’s not a valid target. Enterprise support is a feature, not a product. I don’t mean that as opinion, but as a point of fact. Focus on a set of customers whose only characteristic is a job description is missing the whole point of focus.

Focus needs to be positioned on a job a brand needs to be hired to do. The idea should be to solve an open problem which is either too complex or too uneconomical for anyone else to solve. Corporate buyers have problems to solve but the BlackBerry no longer offers unique or defensible solutions. Furthermore, corporate buyers are themselves being dis-intermediated from the computing purchase decision. Sometimes this process is called “consumerization” but it is more plainly explained as “commoditization”. The selection of tools for workers by a group that claims to understand their needs better than they do is an archaic concept.

This was true even in 2005 when RIM began targeting consumers. It was then that they saw the writing on the wall–that their enterprise business was being commoditized. All of RIM’s growth since has been in consumer segments. By abandoning that trajectory RIM is effectively giving up on growth. And giving up on growth is simply giving up.

  • Neil Weinstock

    Here’s what RIM is saying:  We’re going to give up on the markets where people actually get to choose what they want, because they won’t choose us.  We’re going to go after the markets where devices get foisted on people.

    Essentially they’re trying to perpetuate the tradition of two phones: Blackberry for work, iPhone/Android for personal.

    In the age of consumerization and BYOD, I agree this seems like giving up.

  • http://www.subprint.com joemccann

    Great analysis as usual, Horace.  In regards to the stock, I wouldn’t be surprised if we actually see a pop to the upside as short interest over the past few months has nearly doubled to 60MM shares short.  Coupled with the executive team recognizing “there is a problem” and considering ultimately selling the company, bad is better than horrible and shorts will begin to cover.  The short squeeze effect will be interesting on the premium a private equity firm would be considering to pay for RIM or parts of the company as a reflection of share price.

  • Guest

    Unless I’m reading it wrong, there’s an error in the paragraph immediately before the “RIM Shares per Quarter” chart: “But no company should not be seen in isolation.” The double negative seems to go against what I think you’re trying to say.

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

      Yes, thanks. Fixed.

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

    RIM might just be a victim here, like a cruise ship that was swamped by the unforeseen tsunami that was the iPhone. But it’s awfully hard not to join the chorus screaming imprecations at the captain(s) for not even trying to turn the ship into the oncoming wave.

    Stage 1: Denial:

    It might be apocryphal but it’s been reported that RIM’s first response to the iPhone was to declare it impossible – a violation of the laws of physics. No phone could do what the iPhone was promising to do and provide the battery life it was promising to deliver.

    Stage 2: Anger

    OK, the iPhone CAN do what it says it can do but that’s no problem. We can co-exist. Nothing has to change. Why are you telling us to change? We’re geniuses who created this company! Stop telling us what to DO. We’re much, much smarter than you are.

    Stage 3: Bargaining

    OK, ok, we see where you’re coming from. Tell you what. We’ll appoint a new CEO. That will fix everything, you’ll see.

    Stage 4: Depression

    Our sales are in the tank. Our average sales price is in the tank. Our stock price is in the tank. Being a leader in this company is a tankless job and I am so outta here…

    Stage 5: Acceptance

    “I’d like to thank (fill in your least favorite company here) for giving us this great opportunity to partner with them. It’s a wonderful opportunity for all involved and its what we’ve been striving for all along. Technically this is an acquisition but it’s really a merging of equals. It’s just that some equals are more equal than others…

  • http://twitter.com/squidlr squidlr

    People at the business where I worked hated the company Blackberry in comparison to their personal iOS device. 

  • vincent_rice

    They have no play. It’s over.

  • MattF

    I think that RIM’s strategy now is “Stop The Bleeding.” Doesn’t look good.

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

      RIM is like the Black Knight…

      …”OK, we’ll call it a draw….”

      • Joe_Winfield_IL

        It’s at least more honest than the CEO twins’ cry of “I’m Invincible!” as they stood on one leg.

  • RobDK

    Read this great article by Micheal Mace:

    http://mobileopportunity.blogspot.com/2010/10/whats-really-wrong-with-blackberry-and.html?m=1

    Its from 2010 and predicts exactly what has happened!

  • Sacto_Joe

    I wonder if RIM would be a good acquisition for Apple….

    To build on that thought, it might give them more access to business. Also, there are worldwide distribution systems that would benefit Apple, and possible some intellectual property.

    Going further, there are some users who still prefer a physical keyboard where possible. Maybe Apple could integrate the iOS and a keyboard in this manner.

    Finally, they should be able to pick it up for a good price. Who else would want it?

    • gamburg

      I though the same thing but more from a perspective of Apple licensing IOS to RIM (only keyboard edition of IOS) and RIM selling  its patent portfolio to Apple.  Could be very beneficial alliance.  

      • Sacto_Joe

        Interesting, but it won’t happen. Apple tried licensing once, in desperation. Bad idea, as Steve Jobs concluded as soon as he was back in charge.

      • gamburg

        Last time when it happened things were different and what i am proposing is not a general license to all manufactures but an exclusive / custom license to RIM for iOS with keyboard use.  Apple will not compete with this market and having RIM selling Blackberries on IOS will strengthen Apple ecosystem.  The screen of the Blackberry will be multi-touch to ensure compatibility and minimize fragmentation. 

        Same could be done with B&N.  Apple licenses an IOS for black/white book reader supporting only books + music. B&N kills Android version of Nook and only sells black/white version going forward. Same impact – it will make Apple ecosystem stronger.  No impact on cannibalization since RIM and B&N will not compete with Apple. If anything, there will be a positive halo effect..

      • Joe_Winfield_IL

        Except that iOS now would need to become more like Android.  Software would need to be re-written to accommodate keyboards as primary input, different shaped screens, mono color schemes, etc.

        Also, developers would need to write several versions of apps.  Part of the reason iOS is so profitable for 3rd party developers is its consistency.  Much less effort is required in design and debugging when there are only a few supported devices, each with massive volume.

        I do love the idea of owning RIM’s IP though.  Especially on email security and hosting.  But RIM would never give it up for anything less than an acquisition or major cross-licensing deal like you propose.  Better to wait a year and get it for 25% of today’s cost.

      • Sacto_Joe

        Actually, I was thinking that Apple could bring some original thinking to RIM’s platform, tying in their touchscreen iOS and its app constellation to RIM’s keyboard-centric user base. Sort of merge to give those users who want an integrated keyboard on a small and portable device access to an iOS-driven touchscreen. It would admittedly be more of a niche product, but it might still be decently profitable.

        Just a thought….

      • Joe_Winfield_IL

        It’s intriguing to think about, but I can’t imagine Apple specifically targeting a niche audience today.  The only “small” volume product they make is the ATV, and we all know it is designed to prime the pump for something much bigger.

      • Walt French

        The reason those devices are lightweight and get the great battery life is that they have SEVERELY restricted their power and screen size. My understanding is that BB7 is still a 16-bit system, meaning hardware is built with much simpler CPUs and other circuitry — perfectly great for messaging, but nowhere capable enough for an iOS experience in 2012.

        Which is, after all, RIM’s challenge: they sat on their hands for about 3 years when Apple intro’d the iPhone, confident their customers wouldn’t want additional features and flexibility; accordingly they waited until 2010 to buy QNX; rewriting BB OS would’ve been more work than it was worth. Now they are 5 years behind Apple in a rich software development toolbox; firing the CTO cannot help speed that up. At this point there’s a risk that BBX will never arrive. That’ll put it in 4th place behind current 2% market share Microsoft in apps and support.

        RIP.

      • gamburg

        Yes and no. Android is just a complete wild west when it comes to fragmentation. Have partnership with just one  player and having strict standards will ensure that the fragmentation issues are contained to the minimum. 

        And by the way, there will be fragmentation issues even if Apple doesn’t license OS. We already have an iPhone and iPad screen size.  Now we also have retina size on the iPad. In future, Macs would be able to run IOS apps too (if lion is any indication where Macs are going). Plus Apple TV will support IOS apps one day too. 

      • http://twitter.com/handleym99 Maynard Handley

        My take on recent history is that there is a tremendous amount of (non-obvious) value in having one company control the entire experience. Licensees destroy that value. 

        (a) Licensees send you into the Android/Windows pit of inconsistent and incompatible hardware. OF COURSE if RIM have an iOS license, the first thing they are going to try to do is kit out their devices with something that standard iPhones don’t have, to pick up market share. Maybe their device has a built-in laser pointer, a thermometer, a projector, a finger-print scanner, an SD card slot. Whatever — you then get apps that work with this device but not standard devices. You get fragmentation as RIM decides to ship a line of twelve different devices, which change every three months, and none of which contain the same set of extra features — the same sort of stupidity we’ve seen for years in consumer electronics.

        (b) Licensees are not willing to make an effort to follow your strategic direction. If Apple decides that it has a strategic interest in HiDPI screens, and is willing to lose some temporary profit to push them across the entire line, from iPod Classic and Touch to MacBook Air, it can do so — but if RIM decides that’s too much lost profit, it won’t bother. 

        You might think HiDPI screens are a resolved issue, but what’s the NEXT strategic item? Maybe Apple has been pushing really aggressive GPUs in it’s iOS devices for a reason — and what happens to RIM and their buyers feelings towards Apple when iOS7 can’t run on RIM devices because of the crappy GPU RIM put in them.

        Intel tried to deal with this issue for ultrabooks — and the result has been a bunch of legalistic interpretations of the ultrabook spec that just slide in as meeting the spec — but which don’t form a realistic alternative to the Macbook Air, and which therefore make the ultrabook moniker meaningless, not a distinction of quality.

        MS is trying to deal with this issue for Win Phone. So far they’ve appear to have kept control, but at the cost of essentially telling Nokia (it’s not like anyone else matters) exactly what the phones will look like. If Apple is doing that, they might as well just introduce the iPhone Slide, a new model with a physical keyboard.

        As Horace says — it’s about saying NO.

      • http://twitter.com/handleym99 Maynard Handley

        My take on recent history is that there is a tremendous amount of (non-obvious) value in having one company control the entire experience. Licensees destroy that value. 

        (a) Licensees send you into the Android/Windows pit of inconsistent and incompatible hardware. OF COURSE if RIM have an iOS license, the first thing they are going to try to do is kit out their devices with something that standard iPhones don’t have, to pick up market share. Maybe their device has a built-in laser pointer, a thermometer, a projector, a finger-print scanner, an SD card slot. Whatever — you then get apps that work with this device but not standard devices. You get fragmentation as RIM decides to ship a line of twelve different devices, which change every three months, and none of which contain the same set of extra features — the same sort of stupidity we’ve seen for years in consumer electronics.

        (b) Licensees are not willing to make an effort to follow your strategic direction. If Apple decides that it has a strategic interest in HiDPI screens, and is willing to lose some temporary profit to push them across the entire line, from iPod Classic and Touch to MacBook Air, it can do so — but if RIM decides that’s too much lost profit, it won’t bother. 

        You might think HiDPI screens are a resolved issue, but what’s the NEXT strategic item? Maybe Apple has been pushing really aggressive GPUs in it’s iOS devices for a reason — and what happens to RIM and their buyers feelings towards Apple when iOS7 can’t run on RIM devices because of the crappy GPU RIM put in them.

        Intel tried to deal with this issue for ultrabooks — and the result has been a bunch of legalistic interpretations of the ultrabook spec that just slide in as meeting the spec — but which don’t form a realistic alternative to the Macbook Air, and which therefore make the ultrabook moniker meaningless, not a distinction of quality.

        MS is trying to deal with this issue for Win Phone. So far they’ve appear to have kept control, but at the cost of essentially telling Nokia (it’s not like anyone else matters) exactly what the phones will look like. If Apple is doing that, they might as well just introduce the iPhone Slide, a new model with a physical keyboard.

        As Horace says — it’s about saying NO.

      • Tom

        Wow.  Don’t know much about Apple, do you?

      • gamburg

        Having a different opinion doesn’t mean the lack of knowledge. I have been an Apple investor for 15 years and read and research the company rigorously. 

        The idea i suggested above is drastically different from what Apple have done in the past but it doesn’t mean it is a bad idea. I believe the physical keyboard concept will die in 10 years, so the license with RIM will just naturally expire. Doing what I suggested will ensure that Apple dominate enterprise market and all current RIM customers transition to IOS and RIM could just focus on enterprise consulting/back end (IBM model). And there ways to do the partnership with RIM that do not create fragmentation problem for developers.  

        And by the way, I’ve never really agreed with SJ that licensing OS is bad. If Apple licensed OS before the original windows came out 20 years ago, they would 100% own the PC market. Problem is the decision to license OS later came out of desperation and too late to truly have an impact. Also, if Apple have licensed IOS back in 2007, there wouldn’t be Android or Windows. IOS would 100% own the post PC market. Think about it. Not licensing IOS, giving AT&T 5 year exclusivity on the iPhone and going in partnership with Google were some of the biggest mistake SJ made in the iPhone launch. Just opinion. 

      • kibbles

        had they licensed iOS as you say perhaps they’d own the market. but that market would be fragmented, buggy, and generally as aggrevating as both Windows and Android are. that’s not how Apple rolls…. rule #1: delight the customer.

      • gamburg

        By the way the chances that Apple licenses IOS are almost zero.  But this too does not make the above idea bad.

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

        Apple does not license anything because doing so removes degrees of freedom. There are costs, especially opportunity and information flow costs associated with licensing.

      • Anthony Mazzucco

        An important thing to note is the reason why people, like me, love their Apple products. Apple builds their computers and phones with hardware that optimizes their operating systems. My MacBook has a core duo 2.5 ghz processor and 8 gigs of ram. The speed of my product will annihilate any PC on the market including an associate of mines windows machine with 16 gigs of ram, 4 or 8 core processor etc. 
        Apple’s name is it’s products. If it lost control of the OS for both the phone and the computer, it has nothing. The name will be deteriorated because of PC makers, like dell, trying to put scraps into a metal box. All Apple operating systems are imaged based and optimized for it. With iCloud and Mt. Lion coming out this summer, Apple has no desire to seek a company like RIM. In addition, the QNX system is supposed to be faster than any code on the market. Speaking with a tech analyst, he says that he believes BB10 will be the best phone OS on the market. We will see; I personally think they are too far gone. 

      • br14

        People love Apple products because they’ve bought the hype. It’s a matter of faith.

        There are plenty of comparable products at a fraction of the price.

        On the licensing issue, it’s a matter of market control. Apple wants to control the entire market. Why sell through someone else when you can sell yourself?

        I will not use iTunes and therefore do not have a single Apple product. I will not buy anything that ties me to a single vendor if there are other options.

        Decades ago Apple lost the personal computer battle because they wanted to retain control, despite having better software (not true now of course). And ultimately they will lose the personal device market for the same reasons. Indeed you could argue they already have lost in view of Android market share.

        It’s particularly sad to see retail stores like Best Buy transforming themselves into Church of Apple locations and reducing choice for consumers.

      • http://anthonymazzucco.com/ Anthony Mazzucco

        People love their apple products because they work. There is an element of marketing, but objectively I can tell you that my Apple products destroy their competition. They work better than the rest, but do cost more. For me, there is no price that can be put on reliability. 
        I disagree completely with you when it comes to comparable products. There is no products on the market that can compare to an Apple product. I have owned (and still own) many PCs. I loved Windows XP, and to this day, it is still my favorite MSFT OS. My MacBook is far more reliable, faster, and more aesthetically pleasing than any PC I have owned. I could also argue that I have more functionality than a PC owner, but I feel like you will write this argument off entirely. In regards to the mobile device trend: Up until this year I have owned, pretty much exclusively, BlackBerries. Anyone in the business world will tell you that they were, undoubtably, the best smartphone on the market. This year, I switched to the new Droid Razr (The best Droid on the market in January and Motorola’s best phone currently on the market). I will say that it was a great phone. It worked well and was smokin’ fast. I did however switch over to the iPhone (4 not 4s) a week or two later. I am so happy I did. The Droid was faster and could do a few more things than the iPhone, but the functionality of the iPhone was better (in addition to battery life). In addition, both phones annihilated my BlackBerry. 

        Market control is an argument, but I still think what I said in my previous post is very true. Apple lost the computer market decades ago for a few reasons but those reasons don’t hold true for the personal device market. The smartphone market is very stratified. The more affluent people own iPhones (including the people that want to be regarded as affluent) and Droids are for a more price sensitive consumer. This is not concrete but a metric none the less. Business are turing to Apple over Android for several reasons. I believe that if Apple could meet supply that they would equal to Droid, if not their superior. 

        Companies like Best Buy are doing nothing more than catering to their customers. They wouldn’t supply Apple product unless their was a clear demand for it. You say Apples problem is that it doesn’t license their OS; by giving Best Buy the right to sell their product is their way of gaining exposure to the market (like Google and Microsoft did) while maintaining control and quality of their product.

        I don’t understand the threat of being tied to a single vendor. If a company has a good product, why not use it? Part of Apple’s value proposition is the relationship it has built with its customers, part of this is trust. Why would Apple risk losing this as RIM did (for different reasons)? Apple isn’t keeping me tied to them or any other consumer, they are just making it that much easier to stay with them. 

    • MattF

      No, no, no. RIM is a dying, dysfunctional company. If Apple really wanted to get more access to corporate clients, they’d buy Oracle.

      • Sacto_Joe

        Depends on the price. And I see synergies with RIM that I don’t see with Oracle. But maybe you see something I don’t. Care to illucidate?

      • MattF

        Judging from the way RIM has responded to the disruption in the mobile world, I just don’t see how their assets or their corporate culture would add value to Apple.

        But it’s also true that I’m extremely skeptical about corporate mergers that are motivated by ‘synergy’. Buying real intellectual property, adding to the value proposition for real existing customers, acquiring real assets, sure. But I don’t see any of that in RIM.

      • Sacto_Joe

        You may well be correct that buying RIM for synergy would not work out. I still think it would be worthwhile looking at. But I’m still curious; why would Apple benefit from buying Oracle? It seems a little out of their line of work to me.

      • MattF

        I think that Apple’s pile of cash is still too big, in fact it’s enough to support two companies (and a few small countries). And the orthogonality between Apple and Oracle would reduce the cost and complexity of the deal, making it more likely to be profitable for both pieces. Just a counter-intuitive idea for a Friday afternoon.

      • http://teapartynews.us David H Dennis

        Why would Larry want to sell?

        Oracle’s a viable company and he already has enough yachts to beat up any Navy that could go after him :) .

        Hostile takeovers aren’t Apple’s style, and I think that’s wise.

        D

      • Shameer Mulji

        Maybe Apple could buy RIM just for the software or patents or talent or all of the above not necessarily to get access to corporate clients. 

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

        Apple does not seek access to clients. Corporate or otherwise. They welcome clients who seek Apple.

    • Darwinphish

      Apple has already done a lot to build in-roads with business/enterprise users, certainly more than any of the Android manufacturers.  They could do more, but I suspect they are better off expanding on what they are already doing than deal with the headaches of acquiring RIM.

      Also, if Apple really believed it was missing a lot of sales because the iPhone does not have a physical keyboard AND if they though a physical keyboard could easily be added to an iPhone, they would have done so already.  Also, RIM is having enough problems porting all their software to run under QNX, an OS they own and control.  I can not imagine they would have better luck trying to port these to iOS.

    • Walt French

      OK, 5 points:
      1. Access to the Enterprise
      2. Distro
      3. IP
      4. Physical kbd
      5. Cheap

      1. You’ve been hearing Cook tout how many of the Fortune 500 are working with Apple already, right?
      2. And you’ve watched Apple build out its killer retail system and hundreds of worldwide partnerships.
      3. Yeah, Apple buys IP. I personally hope the patent wars die down a bit, so I hope the value of them will depreciate.
      4. I’m sure Apple engineers are capable of putting little buttons on a phone, too.
      5. Trying to get any good out of RIM would be a monstrous distraction for Apple. Their #1 problem is making enough iProducts and #2 is discovering how to disrupt yet new markets such as cableTV (avg US household spends $139/month!) and a richer wireless net. RIM helps them with neither, distracts them from both. 

      If RIM is failing as fast as some think, there’ll be nothing left besides the IP pretty soon. 

      The natural synergy would seem to be with Nokia, which has a terrible lack of presence in the US; RIM could help Nokia with #1 and #2, maybe internationally, too. But for reason #5, I don’t envision them doing it, either.

      My guess is that some vulture capital shop picks it up, spins out the messaging business as a standalone for the next 3 years that people will care, runs the handsets for a year or two before they implode and sells off the IP.

    • http://wmilliken.livejournal.com/ Walter Milliken

      I would think it would be much more likely to be acquired by Google, for a couple reasons: 1) RIM has a bunch of smartphone patents and 2) RIM is in business cloud services, which Google would probably like to own. The only problem I see with the latter is that Google’s traditional monetization strategy — ads — doesn’t fit corporate IT, and RIM’s monetization strategy (selling an expensive, required cloud service package with their smartphones) is probably dead with all the competition in that area now.

      About the only area where I could see RIM gaining traction again is providing corporate IT with a trustable cross-platform mobile device management solution, which they’ve dabbled in already, I believe. But I’m not sure even that will work in the long run.

    • N8nnc

      The question is “can RIM do anything better than Apple?” If so, then maybe a non-overlapping partnership makes sense. But I don’t believe RIM can do it, so it isn’t going to happen. Technology has moved so fast beyond RIM’s unique contributions that I think their patents aren’t worth much, and certainly not to Apple.

  • http://twitter.com/davidnin David Nichols

    I heard Clay Christensen speak at PARC this week and here’s what I think HE would say:

    “The managers of RIM are trying to move upmarket to sell higher performance, more profitable solutions to their best customers. They are being chased out of the low end by disruptors.”

    Looks like a classic case of the disruptive business theory! 

    The only way to survive is to serially disrupt, and it’s too late for that.

  • OpenMinde

    One of thing RIM must do is to pay IDC a truck full of money to publish a market forecast report that enterprise market will grow at 300% every year in next 5 years.  You know, make believe.

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

      IDC is much cheaper than that.

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  • http://twitter.com/FlopTech FlopTech Engineering

    Re: ‘Sometimes this process is called “consumerization” but it is more plainly explained as “commoditization”.’

    We think the consumerization effect is an inevitable result of technological development.  The easier any technology is to use, the more people will use it.  Apple has always known that, and they’ve leveraged that knowledge to great success in the past 15 years.

    Smartphones in general have become far easier to use, and that’s taken many people by surprise.  A few years ago, only techno-geeks and trained mobile professionals wielded smartphones.  Now anybody who can afford the voice + data plans can use one.  It’s hard for some people to adjust to that change.  And it’s even harder for some corporations to adjust to that fact.  Like RIM.

  • anon

    The write down this quarter was BB7 phone inventory write down, not tablet write down, that was last quarter.
    From the release:
    “…and $267 million ($197 million after-tax) for an inventory provision taken primarily on certain BlackBerry7 products.”

    • Canucker

      And their inventory still increased by $400 to just over $1 billion. This inventory is not exactly comprised of red-hot devices. It’s all end-of-life BBOS7 devices (with some Playbooks thrown in for good measure. I’m surprised RIM has coasted this well on the BBOS7 stop-gap for the past year. Even Blackberry devotees are not buying – and were holding out for BBOS10 devices. After these results, some of these have got to be questioning the companies viability in the long term and may well defect to the other ecosystems.

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

      Thanks. I’ll revisit the data.

  • James Scariati

    “The idea of focus has huge benefits. Focus and the art of saying no are keys to greatness. However, you only succeed if you focus on the right thing. “Enterprise” is not the right thing. It’s not a valid target.”

    I think RIM looks at it this way: they had massive success in the enterprise market originally, but have struggled staying relevant in the consumer market, so the solution is to go back to the enterprise market. From their perspective, it makes sense.

    What they’re not recognizing, though, is that everything else changed around them in the meantime. In RIM’s heyday, smartphone use started with “businesses” and trickled down to consumers. But Apple (and Google) flipped that around by turning smartphones into desirable consumer items. Now, everything flows the other way: people buy smartphones for personal use, which puts pressure on their workplaces to support them.

    RIM is also not recognizing that smartphones have morphed into general-purpose tools that can adapt via apps into basically anything. Focusing on “enterprise” would be like if Apple decided to focus the iPhone on, say, “education.” It doesn’t make sense; “enterprise” is just one thing that a general-purpose smartphone can handle.

    I just saw a commercial for the Blackberry recently, actually, and they talked about how it’s a “tool, not a toy.” Now, of course, RIM isn’t going to say something positive about their competition in their own commercial. But if they really do think that iPhones are “toys” – even after *five year’s worth* of Apple eating their lunch – then they are truly missing the boat.

    • Walt French

      Damn, I’ve forgotten the cliché. What is it? “Customers seldom buy what the sellers think they’re selling” ?

      Their past success was in a highly-reliable, highly-secure messaging tool. That market has imploded, replaced by a range of “good enough” tools on the highly desirable iPhone platform. Their current success is with low-cost BBM services to teens, a quirk in the pricing structure that carriers will rationalize across platforms when it suits their needs: probably, very soon.

      Their past successes are no longer relevant. Their current success can be demolished with the stroke of a pen, letting (probably, letting all sets have fairly-priced SMS, with Android & Bada the biggest beneficiaries).

      RIM ignored the iPhone-type revolution in 2007, and now has lost control of its destiny.

    • JohnDoey

      The thing that is wrong with the tools and toys line is iPhone can morph into about 100,000 legitimate tools (plus many more games and movies and so on) while a BlackBerry can morph into maybe 10.

      There is a RIM commercial where 2 DJ’s who have apparently either been struck in the head recently or just returned from being stranded on a desert island tell us they use BlackBerry because they need tools, not toys, but iOS has a ton of music and audio tools and instruments (including DJ instruments) that have been ported from the Mac because CoreAudio and CoreMIDI are there in iOS. A DJ who is carrying a BlackBerry would HAVE TO also carry at least a $199 iPod touch. To not have a pocket full of iOS apps if you work in music is like brining yourself with a crowbar every morning.

      • Walt French

        Haven’t had the pleasure of seeing that commercial, but I think it mostly shows how desperately clueless RIM was about what its customers wanted. Or perhaps they believed that Apple was “all about marketing” so all they had to do was tell people they were into music, too. Either way, it makes sense for their Chief Marketing Officer to have taken a hike, first.

        Now the mystery is how quickly RIM will be able to present a decent BBX and developers’ toolkit for it, and how good the BlackBerry brand will still be when it is ready. Pulling the plug on US consumer phones seems like a smart idea, since they’re not selling well, anyway, and they can say “we’ll only sell great devices” to salvage their reputation.

        Well, or not. Hard to tell what unique little capability a savvy team will be able to coalesce around and regroup. Dicey.

      • http://profiles.google.com/johan.israelsson Johan Israelsson

        Anyone remember good old Commodore banging their head in the wall claiming the C=64 is a tool and not a toy. And then the same with the Amiga, it’s a tool not a toy. Playing for the business segment as it is seen as higher class.

        There is finally a disruption starting to happen in the enterprises in that it is the workers (in a broader sense) that is beginning to decide what tools they want to use at work, not the IT department.

      • James

        Right, that’s the commercial I was referring to. It’s just pathetic because if anything is a better “tool,” it’s clearly an iPhone with a full touchscreen that can morph into anything via a huge selection of apps. The BlackBerry, at this point, is much more of a “toy” than an iPhone since it’s so limited by comparison.

    • http://twitter.com/oldvillain David

      The BlackBerry looks like a calculator. If you constrain the interface you get an e-mail, ‘phone, calculator and calendaring device. Great for Corporate and Government types that like to stay on the rails.
      If the interface is less constrained and you build up ineffective ecosystem of Apps, as Apple have done over the years, then you have a pocket computer that also make ‘phone calls.
      And good luck with selling RIM. 
      I liken the potential selling of the business to having just torn-out the site of your ship on an iceberg and then putting out a message offering the sale of your vessel.
      The only interested party would be James Cameron.

  • Canucker

    Watching RIM slowly implode over the past 5 years has been painful. It’s only now that they appear to even recognize that the green stuff they are neck deep in isn’t money. They are bleeding their talent and the markets have given up waiting for them to deliver. Their announcement that they will no longer provide guidance is the equivalent of penning a suicide note in advance. Yes, they can continue to be a going entity for a couple of years but they know that the glory days are over as they have no back-up plan.  Playbook was a bust (actually an anchor around their necks) and diversifying through software solutions and services missed the boat two years ago. They have patents and that the helium in these is what is keeping their share price afloat. But selling those will simply be a one-time bail out with an ice bucket while the water continues to flow in. The killing blow will likely be from Windows 8 but it’s exsanguination began many years ago.

  • albsure

    I think RIM should stop competing on price. No one is buying a RIM device because its cheaper than the competition right now, there buying it because its either what they need or what they still like. So they might as well sell less devices and increase the profit margin on them. They dont need all these product lines for essentially the same phone. They should just sell the Bold for a bit cheaper and cancel the Curves / Torch / Storm things etc.. all the cheaper phones. That should bring the avg profit from each phone up and reduce the manafacturing burden. The reality is, the storm and the torch are no competiton for the iphone and android competitors. The Bold is the only true competitor with enough USP to sell in this market.

    They should just cancel playbook promotion and just write it off until they can stabilize the handset sales and profitability. I suppose the key to survival is finding who your real market is and “doubling down” on servicing them and getting more money from them. The answer in the short term is not looking for other markets, there is no time to develop  new markets.

    So in that sense, focussing on Enterprise customers and developing markets and reducing their product lines are what they need to do. Thats where they sell most and thats where there products are needed most. They should just charge more in those markets and add more value (better customer service etc.. for  enterprise, free off line storage for developing markets etc..).

    At the end of the day, the RIM and Blackberry brands are still amazing. In some ways the brands are worth more than the company. It has better brand recognition than any of the android companies and is probably second to Apple in terms of brand in the mobile market. They just need to stop trying to compete in exactly the same way, with the same type of products as their competition. They need to go back to startup mode which means finding your niche and being the best at that. Their niche is the Bold and BES. Forget everything else.

    • JohnDoey

      I agree that BlackBerry is a great brand, but RIM is not only not well known, it just sucks in every way as a brand. It’s the name of a sex act that most people don’t want to talk about, and it’s an acronym, and it has no personality.

      Me, I would rename the company “BlackBerry” and then I would only have 2 products, both named “BlackBerry:”

      - BlackBerry phone — 3-4 inch touchscreen plus case with mechanical keyboard built-into the case

      - BlackBerry tablet — 9-10 inch touchscreen plus case with mechanical keyboard built-into the case

      … because those are the 2 sizes in which graphical apps have always existed. If you’re an app, you’re either a widget (3-4 inches) or you’re full-size (9-10 inches.) They are all like that for the last 28 years, which is the entire history of graphical computing. That is part of what makes 7 inch tablets a total joke.

      They would have to only have 2 devices, because they also have to provide a C/C++ app platform and developer tools — which have to run on the Mac for sure, and anything else is secondary.

      If they’re not going to do that, then they are not going to be part of the future of personal computing. The 1990′s desk with a giant landline phone and a giant Windows PC is now an iPhone and an iPad, wherever you are. Why do I need a pager if I have an iPhone and an iPad with me all the time? Nobody needs that. Even RIM would tell you that you don’t need your BlackBerry if you are sitting at a 1990′s desk with giant landline phone and giant Windows PC. So RIM made this thing that let you have a mini-desk when you are away from your desk, and then the desk became an iPhone and iPad and it is now so small, we don’t need a mini-desk BlackBerry anymore. A device without real Web apps and real C/C++ apps is a toy computer. There is no need for toy computers when real computers come inside iPods for free. 

    • Cordell

      RIM’s forte has always been SECURE, INTERNATIONAL communications.  Enabling executives to send and receive messages anywhere, anytime without the possibility of a third party intercepting and reading these messages has been the core of its enterprise business.  That is RIM’s unique selling point.  What RIM needs to do for its long-term survival is to become device and OS agnostic.  Supporting secure, international communications on iOS and Android devices, not just those made by RIM, will ensure its future viability.  If the company’s focus is selling to a market segment rather than selling a unique feature set, the company is doomed.

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

        What do those executives use for secure communications while using a PC?

  • JohnDoey

    Their strength is making pagers. Always was. Still is today. That is the problem.

    RIM redefined the phone as a pager, and then a few years later, Apple redefined the phone as an iPod. Therefore, if RIM still wants to make phones, they need to become strong at making iPods. Obviously, they cannot get their minds around that.

    Or, they could redefine the phone again as something other than an iPod.

    • br14

      “Apple redefined the phone as an iPod”

      Quite often an Apple phone IS just an iPod.

      • http://pulse.yahoo.com/_47XHGLZVO6IUYLMWVUYFVN5LQU Dr No

         Quite often, RIMtards don’t have the first clue about technology.

  • Dick Applebaum

    Like the new site format!

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  • br14

    RIM is not about to give up on the consumer market. Their only growth is in consumer sales – outside North America that is. Or is that what you’re worried about?

    And the drop in sales is largely due to a failure to deliver new devices on the traditional schedule. Sales were lowest in those quarters when RIM failed to deliver new product. They have been distracted by the advent of BB10.

    There’s little doubt that the company has made strategic blunders, however, their engineering is as good as it ever was, and their new product line looks pretty good.

    RIM’s problem is one of execution. They have turned themselves from a slim efficient organization into a fat, overweight bureaucracy. A company that once released new product every 3 months with 2000 staff, now finds it difficult to produce 1 new product with 20,000 staff.

    And so far they’ve been too blind or too stupid to realize where their real problems lie. Perhaps Mr Heins knows and will act.

    • http://pulse.yahoo.com/_47XHGLZVO6IUYLMWVUYFVN5LQU Dr No

      The drop is sales is due to a failure to make anything that the buying public actually cares to spend money on.

      RIM’s problem is that they didn’t see the train coming down the tracks when Apple introduced the iPhone back in 2007, and it’s too late to do anything after you’ve been run over.

  • Andrew

    Does anyone have a list of what Apple canned when Steve Jobs came back?
    How do the RIM portfolio and financial situation compare?
     

    • ftaok

      Jobs canned a few projects and consolidated the Mac product lines.

      1.  Killed the MacOS clone program
      2.  Killed the Newton project
      3.  Indirectly killed the LC and Performa lines by introducing the iMac and simplying the Mac line into 4 categories.  iMac, iBook, Powerbook, PowerMac
      4.  Killed Copland??? in favor of what would become OS X.

      I think he may have also killed product lines that didn’t fit Apple’s core … such as Printers.  I’m not entirely sure.

  • Jonshf

    The phrase “giving up” implies losing and in essence making a mistake. While it may well be that RIM has made many mistakes that have led to their position today and has not been good for there shareholders, the question now becomes what is best for the shareholders from this point on. “Giving up” might be the correct course.

    They could take a Ballmer route and invest huge amounts of money and do anything to “win” the battle. However, looking at the price of RIM today, it seems to me that they can just continue their course and securely make alot of money for the shareholders in the coming years. Yes, they will lose the race but the shareholders will win.

    I wonder how Microsoft would have fared had they taken this kind of course many years ago and just milked their money-making product lines. Might that not have been better for shareholders instead of throwing endless capital into things like Bing, Xbox and Windows mobile, in a race that they’ll probably lose eventually anyway.

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

      Due to most of the underlying causes of value creation in technology being exponential growth (Moore’s law, Metcalfe’s Law, Gene’s Law) if a technology company does not grow, it will cease to exist in a very short time span. The dynamics are such that many investors steer clear of this unpredictability. Warren Buffett is famously among them though he did decide that IBM might be worth consideration.

  • zak

    Does anyone think that Rims last stand will be to adopt the Andriod OS?

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

      I don’t believe they will. What purpose would it serve?

      • zach

        Apps! and the android brand with rim hardware. Most android hardware is inferior to rim devices

        The share price would double on that anouncement

      • zak

        Also are you based in NYC I’m a college student here love the site and podcast,was wondering if you needed an intern.

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

        Thank, however I’m located in Helsinki. http://www.asymco.com/people-of-asymco/

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  • http://pulse.yahoo.com/_QJSXCUZ2REOUMLH6NK5BIE4XQI kyle

    AHAHAHAHAH,so many virgins here.. No need for big words, or mathematical figures. Blackberry plain old SUCKS. The phone looks so outdated, its slow, has such limited apps, its just horrible. It was cool 5 years ago, but now its just boring.

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

      So is it the destiny of every cool thing to be boring in five years? Are you proposing the five year coolness cycle time as axiomatic?

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