RIM – a fall from grace

Two news articles piqued my interest last week. First was Marissa Meyer’s (the CEO of Yahoo) announcement that all employees would now be provided by free smart-phones and accompanied data plan. This would be along her priority that Yahoo would have to be a major player in the mobile world by 2015; in order to do so would require that employees use and understand user behavior to create a compelling mobile value proposition. What was telling were the vendors chosen Apple, HTC, Samsung or Nokia….. but no RIM. On top of this Yahoo would now discontinue IT support for the Blackberry platform.

The second was thescripted and belted out by RIM executives for the Blackberry JAM developers’ conference.

I have seen performances, but perhaps never something that sounded so desperate an effort to keep the few developers who haven’t deserted them – as yet. The company has now literally put all its eggs in one basket focusing on the BB10 launch promised for next quarter. If I was a shareholder I would have to ask CEO Thorsten Heins if this is the best punch that he could pack. I am also a bit mystified on their selection of their CEO in the first place – given that he came from Siemens who themselves do not have a stellar track record in this regard and hasn’t done anything radical enough to shake up a company which perhaps desperately needs just that – a different way of looking at their business.

This is just what I will try to postulate; perhaps not rocket science but drawing it up from first principles and positioning it against current competitive trends in this space.

What has been BB’s strength, the USP which drew enterprise customers in hordes during the boom years? It could be summarized as the phone with its ubiquitous keyboard as well as the BBM messaging and email platform offering secure communications prized by enterprise customers. This was the firm belief that this capability would not be replicated and stuck to their strategy over a decade. A decade is light years in the fast moving telecom space. Fast forward a decade later and touch screens are the order of the day with technologies such as swype making typing easier. At the same time 3^rd party companies have come up with compelling solutions which offer similar levels of security but are compatible across multiple platforms and/ or are available at a lower price point. Perhaps they do not maintain the BB legendary watertight server structure but for a majority of the populace this is just good enough. At the same time the shift in behavior has ensured that bring-your-own-device (BYOD) is gaining popularity and enterprises are pandering towards the preferences of their employees who prefer an Apple/ Android phone with thousands of apps to the Blackberry. To its own consternation Blackberry has been unsuccessful in wooing developers its platform – ‘no developers – no apps’. On top of this one USP was the ability compress data in order to squeeze data in older 2G – 2.5G network. With the emergence of 3G/ 4G networks media is now the primary bandwidth hog – email is no longer a red flag item. So now RIM is left with a device which few want, with an app platform which looks like a desert compared to the rest and with messenger and secure email no longer being the preferred service. I will admit that I do not have any deep insights into BB10, but perusing the news and blogs leads me to many skeptics and a few optimists. Perhaps it is drawn from past history with many promises and a track record of under-delivery.

So what could RIM do? On talking to present and past BB users one gets the feeling that although people have gotten past the desire for the handsets (now preferring the iPhone and devices from the Samsung/ HTC universe) there is still an appreciation for the neat and effective BBM and email service. Could RIM drop its pretense of being a device company and migrate along with the rest of the world into being the ‘multi-platform app’ for enterprises. Such an app (or an ecosystem of apps) would leverage the ‘security and trustworthiness’ of RIM, would appeal to the broad range of former RIM BB users who loved the service, but perhaps are now users of different handsets.

Of course, this is no Blue Ocean, but RIM does have the background, the brand and the history to deliver such a service. It would mean a harsh restructuring of the company, but RIM would be able to survive – find its mojo and hopefully emerge as a phoenix in the expanding and lucrative billion dollar mobile enterprise universe

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours

Nokia & Microsoft – a failing strategy?

The past few weeks must have been a veritable headache for Stephen Elop and his crew at Nokia, one which would be shared with his former employers at Microsoft. After a lot of ballyhoo, and just one week before the iPhone 5 launch the much vaunted Window 8 phones were finally launched at the Nokia World event. This one was deemed important enough that the Microsoft head honcho, Steve Ballmer attended in person.

The result was a disappointment and the stock market made this amply clear by the end of day. What definitely did not help was Nokia resorting to cheap trickery to ‘enhance’ the feature set or the fact that they would generously dole out around $150 million to carriers to subsidize the device. No small wonder many analysts sent in a buy recommendation, with some trying to figure out the value of Nokia’s patent portfolio determining the lowest price at which they could snatch a bargain. But I do not want to dwell only on the negatives, but instead try to peer through a looking glass to try and gather what could or should they do to change this downward spiral.

Let us look at the bigger and far brighter picture. Although smart-phones adoption is increasing fast at the same time they form a tiny fraction of the total number of phones which stands at around 6 billion! For example in South Africa where I am currently based, only 14% of the total subscriber base own smart-phones. From a market opportunity, well there is certainly a huge untapped market to be explored rather than having to fight for market-share in a saturated environment. Agreed this market is primarily in the developing world – but one market which Nokia has keenly understood for over a decade. Nokia has honed its skills in being able to deliver feature phones at low prices and is a well loved brand in this community. Microsoft too is well known in these circles. Rather than aim for a head-on confrontation with Samsung and Apple in developed markets wouldn’t it be interesting to aim for a Windows 8 touch-screen device in the APAC and Africa regions? Nokia could conceivably energize its much vaunted logistics and R&D to create such a device in a global partnership with Microsoft. This would not be a retreat from a battle, but prepare and establish a strong presence in the smart-devices category in a market which is rapidly growing both in earning power as well as numbers. This would need to extend towards devices more than just smart-phones. The Windows 8 platform could offer just this leverage. You could then conceivable have a similar unified experience (a.k.a. Apple) across all your devices, which could make the whole deal a more compelling value proposition.

Of course, this is not a sure shot win. For starters Nokia needs to be doubly aggressive in this case facing the emerging threat of the Chinese with Android powered devices. I believe the whole hoopla with the developed markets is a sorry distraction in this respect. Microsoft may even need to revisit its Windows sales strategy and business models if it wants to be serious in the mobile business. None of these are easy decisions, some of which sit on top of large egos at the management at both companies. Perhaps it is time for them to learn from their teams in the developing world, realize and seek this opportunity and move swiftly to capture it before it is too late.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours