“The Company will most likely not survive” “It needs to be saved” “After a very promising start, the company started to face increased competition and started to fall behind” “Arguably one of the worst managed companies in the industry.” Just to be clear, these are quotes that are a decade old and they were all said regarding what is now the top tech company in the world, Apple Inc (AAPL). Ironically, those same quotes are now often associated with one of Apple’s rivals, Canada’s Research in Motion (RIMM), which produces the Blackberry. The company co-managed by Mike Lazaridis and Jim Balsillie that even we have been quick to pronounce dead and even suggested going long Apple against RIMM.
I recently tweeted that it has became easy to forget that Research in Motion is still a profitable, growing company that has over 20% of market share in one of the great industries of this era– Smart Phones. Why? Because RIMM used to be the dominant player only years ago and has been quickly falling behind as it faces competition from multiple angles but especially from Apple’s iPhone and Google Android powered phones. In 1997, Apple seemed doomed; “Apple was in very tough shape. In fact, most likely it wasn’t going to survive” – Bill Gates.
Apple’s (AAPL) Miracle Recovery
“One day Apple was a major technology company with assets to make any self-respecting techno-conglomerate salivate. The next day, Apple was a chaotic mess without a strategic vision and certainly no future” – Time Magazine in 1996. It’s easy to look at Apple right now and forget that things were looking very bleak even a decade ago. The comeback has been spectacular by any measure and it all happened because of a few key launches. The iPod, iPhone, the revival of the Mac line and the recent arrival of Ipad tablets have all happened rather quickly and have helped Apple go from near extinction to being the most valuable and most admired company in the world.
-Lack of Innovation: Apple and Google have both been able to generate hype regarding new features and new products. When is the last time you heard excitement about a RIMM product? Apple came out with an Ipad a couple of years ago that created a huge buzz. How did RIMM react? By launching an inferior product (by every possible measure) Playbook competitor over one year later, a product that was launched after Ipad’s 2nd generation started selling. It was a joke and remains so to this day in my opinion. Why would someone buy a Playbook? The only reason would be that the consumer is a dedicated RIMM client. That is not good enough. There is no way that RIMM can compete if it does not come up with products to generate buzz and hype. Copying whatever Apple and Google powered devices produce will be a losing proposition.
-Lack of Vision: Both Apple and Google quickly understood that what would make the biggest difference in the mobile space was not the actual hardware but rather the applications that were being made available to users. It’s incredible that despite its huge user base, RIMM was never able to attract developers to make the Blackberry World App Store anything even remotely comparable to what is available on Android stores and Itunes. Getting an early start was key and in that regard, RIMM failed miserably. If the company does not recover, I will probably point to this lack of vision as the primary reason why it could not turn things around.
-Erosion of Business Users: RIMM had a huge lead in the corporate side and still does have a lead to this day but it needs to show more innovation, more flexibility and commitment to being a solid player. That battle is still being played and RIMM could very well turn things around because these big corporate accounts are slow to change unless you give them too many reasons to do so.
-Investors in Panic Mode: Investors are looking at numbers like market share and overlooking numbers like revenues, profits, and growth. RIMM does not have much momentum but it is far from a dead as well. I think it’s important for RIMM to focus on a few key areas (apps, innovation, vision, etc) and forget about investors, they will come around when other metrics become more favorable.
-Lacks the “It” Factor: Smartphone users are young, connected and they do not have a clear and attractive vision of RIMM. That can be changed but it must be done soon because the brand is getting weaker every day. New marketing campaigns, a better integration of social media and other use of new technologies as well as solid and innovative products could be enough to turn things around.
“Of all the leaders in the industry that I’ve worked with, he showed more inspiration and he saved the company.” – Bill Gates: Few facts are more agreed on then the fact that Steve Jobs has a huge part of credit and that without his return to Apple in 1997, the company might have ceased to exist much earlier. To say that Research in Motion could put the hand on someone of his vision and talent is probably hoping for too much. Many have been criticizing RIMM’s co-CEO model recently and calling for change but whatever happens, I doubt there is someone even close to his talent that would consider going to what seems like a sinking ship at the moment. Think about it– Would Steve Jobs have gone back to Apple if it had been any other company in a similar shape? Probably not. It was close to his heart. Who could possibly turn the ship around for the Waterloo based company? It’s unclear.
Is RIMM One Phone Away From Becoming Relevant Again?
I have been very negative about RIMM’s prospects and have certainly not seen anything to indicate that things are turning around. However, I think it’s important to consider the fact that the launch of a superior phone combined with a “smart” marketing campaign to make Blackberry “cool” again could be enough to reverse the tendency. It’s easy to forget how quickly things turn around and the launch of any one product could have a huge impact on RIMM’s momentum. Is it likely? No. But I still think it’s risky to short a company that still has so much going for it. RIMM has a huge user base, especially in the business world and it would need a “miracle” to turn things around in my opinion. It’s also easy to think of RIMM as a declining company because of its diminishing market share but it’s a company that has growth, it is simply being outgrown (badly!) by its two main competitors.
Will It Actually Happen?
I must admit, I am very skeptical and consider the possibility that RIMM could pull this off remote at best. That being said, going short on RIMM has its risks and I certainly think that one of those risks is seeing all of that money and resources actually come up with a solid product. It is an uphill battle but it’s certainly not possible. Would I bet a lot on it happening? No… I don’t see any real leadership and there doesn’t even seem to be much acknowledgement of how bad things are.