Tuesday, June 12, 2012

RIM on the Ropes

Story first appeared on NPR.

President Barack Obama couldn't bear to part with his BlackBerry. Oprah Winfrey declared it one of her "favorite things." It could be so addictive that it was nicknamed "the CrackBerry."

Then came a new generation of competing smartphones, and suddenly the BlackBerry, that game-changing breakthrough in personal connectedness, looks ancient.

There is even talk that the fate of Research In Motion, the company that fathered the BlackBerry in 1999, is no longer certain as its flagship property rapidly loses market share to flashier phones like Apple's iPhone and Google's Android-driven models.

With more than $2 billion in cash, bankruptcy for RIM seems highly unlikely in the near term, but these are troubling times for Waterloo, Ontario, the town of 100,000 that was transformed by the BlackBerry into Canada's Silicon Valley. RIM is Canada's most valuable technology company, an international icon so prestigious that the founder and its other driving force, are on an official government list of national heroes, alongside the likes of Alexander Graham Bell.

RIM's U.S. share of the smartphone market belly-flopped from 44 percent in 2009 to 10 percent in 2011 according to market researcher NPD Group. The company still has 78 million active subscribers across the globe, but last month RIM issued a warning that it will lose money for the second consecutive quarter, will lay off workers this year, and has hired a team of bankers to help it weigh its options. Last July it slashed 2,000 jobs.

Of RIM's 16,500 remaining employees, 7,500 live in Waterloo, a university town 90 minutes' drive from Toronto, where everyone seems to know someone who works for RIM.

The decline of the BlackBerry has come shockingly fast. Just five years ago, when the first iPhone came out, few thought it could threaten the BlackBerry. Now the Chief Executive says his employees are getting asked all the time, 'What's going on with you guys? What happened? I mean RIM is the star of Canada and what happened to you guys? And how bad is it going to go?'

RIM's software is still focused on email, and is less user-friendly and agile than iPhone or Android. Its attempt at touch screens was a flop, and it lacks the apps that power other smartphones. Its tablet, the PlayBook, registered just 500,000 sales to Apple's 11.8 million in the last quarter despite a price cut from $500 to $200, well below cost.

RIM's hopes now hang on BlackBerry 10, a new operating system set to debut later this year. It's thoroughly redesigned for the new multimedia, Internet browsing and apps experience that customers are now demanding.

The CEO, formerly RIM's chief operating officer, says he can turn things around with BlackBerry. He took over in January after the company lost tens of billions in market value and the founder stepped down along with the co-CEO.

RIM was once Canada's most valuable company with a market value of $83 billion in June 2008, but the stock has plummeted since, from over $140 share to around $10. Its decline is evoking memories of Nortel, another Canadian tech giant, which ended up declaring bankruptcy in 2009.

But Waterloo is home to more than 800 tech companies and is certainly no company town, many here insist. Smaller firms like e-learning company Desire2Learn have doubled their head count in the last year, and Google has opened an office here.

The chairman of the Center for International Governance and Innovation, a Waterloo-based think tank, likens Waterloo to Rochester, New York, where the blow of Kodak's bankruptcy filing is cushioned by the network of startups the company helped to spawn.

They've taken an enormous hit because of the collapse of Kodak, and Waterloo will take an enormous hit assuming that RIM ultimately vanishes from the scene, but the overall economy and region has been so fundamentally changed by RIM that it will actually do very well.

In an interview with The Associated Press at RIM headquarters in Waterloo, the CEO said he won't try to compete head-to-head with Apple but will try to build on RIM's strengths, such as its dominance of the corporate smartphone market. RIM says more than 90 percent of Fortune 500 companies use BlackBerry and that more than a million North American government workers rely on BlackBerry's software security.

But he acknowledges RIM failed to quickly adapt to the emerging bring your own device trend, in which employees bring their personal iPhones or Android devices to work instead of relying on BlackBerrys issued by their employers.

That's where BlackBerry 10 comes in — delayed but not too late to vie with the new Apple iPhone expected this fall, or so the company hopes. At the end of the day if the product is good you can always come back.

Other tech companies have indeed recovered from the ropes. The late Steve Jobs said Apple was less than three months away from bankruptcy when he rejoined it in 1997, and it's now the world's most valuable company.

For more Electronics News, visit the Electronics America blog.
For more national and worldwide Business News, visit the Peak News Room blog.
For more local and state of Michigan Business News, visit the Michigan Business News blog.
For more Health News, visit the Healthcare and Medical News blog.
For more Real Estate News, visit the Commercial and Residential Real Estate blog.
For more Law News, visit the Nation of Law blog.
For more Advertising News, visit the Advertising, Marketing and Media blog.
For more Environmental News, visit the Environmental Responsibility News blog.
For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.