A Playbook for Fighting Apple and Google
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SPECIAL REPORT A PLAYBOOK FOR FIGHTING APPLE AND GOOGLE With its new tablet computer, RIM has a small window of opportunity to reinvigorate itself and match the momentum of its rivals. REUTERS/ROBert GALBRAITH BY ALAstAIR SHARP its way -- if not quite its throne. millions of its workaholic devices each WATERLOO, ONtario, MARCH 15 Research In Motion is holding on to profit quarter to a growing global audience. growth and impressive margins. For all But the attention of investors, analysts NCE UPON A TIME, BlackBerry was the consumer appeal of Apple products, and developers is drifting elsewhere and king. Then came the iPhone, followed BlackBerry is still dominant in corporate the Canadian company, in the midst of byO Android. And BlackBerry seemingly lost mobile communications and RIM sells a major platform and product transition, MARCH 2011 RIM MARCH 2011 is seen possessing but a small window of opportunity to reinvigorate itself and match Research In Motion and its peers the momentum of rival mobile monarchs Apple and Google. RIM valuation limited by expectation of slowing earnings. The PlayBook tablet computer, due to Research In Motion Apple Google Nokia launch within weeks after a six-month pitch, Share price performance – percent Forward P/E ratio is RIM’s first product to use an industrial- 400 50 strength operating system based on QNX, a powerhouse microkernel (rather than the 300 40 typical monolithic kernel) which RIM bought last year and aims to incorporate into its future smartphones. 200 30 QNX -- which also runs nuclear power plants, medical instrumentation and Cisco’s 100 20 core Internet routers -- is the brains behind many of the infotainment systems shipping in new cars, and RIM plans seamless interaction 0 10 08/03/1 between those dashboards, its PlayBook and 1 its range of BlackBerry smartphones. -100 0 The PlayBook is a multitasking behemoth 2007 2008 2009 2010 '11 2007 2008 2009 2010 '11 in a petite package, able to stream a high- Source: Thomson Reuters definition video to a television screen via a Reuters graphic/Stephen Culp HDMI cable while a user simultaneously edits a presentation or plays an immersive game “THE PLAYBOOK on the 7-inch device. It is also a minor revolution for a myopic SHOWS THAT RIM HAS company that has long been intolerant of LOST SOME OF ITS risk, insiders say. Find more Reuters special reports at “The Playbook shows that RIM has lost COLLECTIVE FEAR, BUT our blog The Deep End here: some of its collective fear, but only because ONLY BECAUSE IT’S A http://link.reuters.com/heq72q it’s a proven moneymaker for other companies two years,” Fraser said. If it was the iPad’s who have already blazed a path for RIM to PROVEN MONEYMAKER runaway success that forced RIM’s hand, take,” said one former RIM software engineer. FOR OTHER COMPANIES Lazaridis ain’t admitting it. Those who know him best say Mike In several interviews with Reuters in recent Lazaridis, the engineer founder of Research WHO HAVE ALREADY months, executives including Lazaridis and In Motion, never believed a tablet computer BLAZED A PATH FOR his salesman co-chief Jim Balsillie have was the right fit for the BlackBerry maker. painted the PlayBook as a gilded object “Mike is a purist. He sticks to his main RIM TO TAKE.” blessed with perfect timing and pedigree. theme,” said Robert Fraser, an early wireless “For me, it’s all about mobile computing pioneer and RIM partner whose concept of installed worldwide. and always was. And it’s about always a personal communicator was eventually That overwhelming success, however, choosing the right moment, the right time, embodied by the BlackBerry. “One of the coupled with a lawsuit that almost shut the the right technology,” Lazaridis said. reasons RIM has been so successful is whole operation down, bred intense caution That’s why RIM took the painful decision because they haven’t deviated.” that could ultimately threaten the company’s to delay the project to ensure it packed Texas That theme was wireless email, sent via a future as it shies away from betting on risky Instruments’ dual-core processor at launch, server network that compresses and encrypts innovations. which is expected within weeks. messages and guarantees delivery, vital for “We decided the tablet market was still business in a world of limited radio resources. SOMETHING CHANGED in its infancy, it hasn’t really taken off yet,” Part of RIM’s solution, the BlackBerry AS far baCK AS 2005, when it became Lazaridis said, dismissing the headstart of Enterprise Server, sits behind a corporate feasible to display a browser on a wireless Apple, which pocketed $9.5 billion from firewall and ties closely to proprietary device, Fraser was pushing his friend sales of almost 15 million iPads in 2010, three back-end systems. The whole operation is Lazaridis to branch out to a larger screen, to times most initial forecasts, and this month managed by massive data centers run by no avail. unveiled an updated version. RIM, which also enable the free BlackBerry Yet a year after Apple’s iPad captured It may be in its infancy, still dwarfed by Messenger service so beloved by teenagers. imaginations and made the long-possible both smartphone and laptop sales, but it is RIM’s BlackBerry service, launched in tablet computer a market reality, RIM is growing fast and a verdict on the viability 1999, was an immediate hit with white-collar about to follow suit, with its smaller, more of PlayBook and its QNX centerpiece is workers and politicians, and today there are business-friendly version, the PlayBook. expected by year-end. more than 250,000 of its enterprise servers “Something changed his mind in the last 2 RIM MARCH 2011 CONNECTED: A man uses a mobile phone as he walks in front of a poster advertising BlackBerry phones inside a hall of the upcoming CeBIT fair in Hanover February 28, 2009. REUTERS/HANNIBAL HANSCHKE “Let’s not make any bones about it, they’re trying to fulfill this transition during Research In Motion shipments, subscriber growth an incredibly hectic time and one where RIM keeps impressing with BlackBerry numbers. they’re seeing a huge amount of competition Millions Net subscriber additions* Units shipped externally,” said Geoff Blaber, an analyst at 16 CCS Insight. “It gives them the framework, it gives 14 them the opportunity to compete,” he said 12 in reference to QNX. “What is uncertain now ... is how they’re going to deliver that beyond 10 the tablet.” 8 Then he adds a hedge: “History has taught us to be very careful of writing RIM off. By the 6 end of this year I’d expect to see a pretty big 4 change in terms of what they’re offering.” 08/03/1 2 BUSINESS ALTERNATIVES 1 0 PERHAPS THE biggest threat RIM faces is FY 2008 FY 2009 FY 2010 FY 2011 the impression its secure enterprise solution * RIM will no longer publish subscriber metrics on a quarterly basis can be easily replicated or even dismissed as Source: Company reports unnecessary, allowing employees to use their Reuters graphic/Stephen Culp own device and handily saving corporations the cost of providing and managing a fleet of “There will be a need for one system “Other device makers are catching up on BlackBerrys. that supports multiple devices,” says the encryption and how to share information Business software company SAP is certainly company’s chief technology officer, Oliver without storing it on the device,” he said. not waiting on RIM to move on its own mobile Bussmann. RIM’s Waterloo neighbor Open Text, a computing strategy. It has bought 3,500 And SAP has one, called Afaria, which leading provider of software to manage iPads for internal use as it advises its more promises device-agnostic security and enterprise content and workflows, recently than 100,000 corporate customers that application management for Apple’s iPhone bought a company that builds app platforms there is life beyond BlackBerry. and iPad and Android devices from Samsung. on any device. 3 RIM MARCH 2011 NO VISIBILITY Research In Motion: revenue by region THERE IS PERHAPS no other technology company on the planet, no other established RIM increasingly relies on international markets for growth. Revenue – $ billion company in any sector for that matter, whose 6 future prospects elicit such determined variance of opinion as Research In Motion. Other 5 Its fiscal 2011 results are due by the end U.K. of the month, with analysts expecting the Canada 4 company’s earnings to have grown by 44 U.S. percent to $6.33 a share. Yet for the next 3 twelve months, expectations range between $4 and $8 a share. “The PlayBook is a great example of 2 where we don’t feel like there is any visibility 1 whatsoever,” said Tim Caulfield, head of 08/03/ 11 equity research at Franklin Templeton’s 0 Bissett Investment Management. “It’s Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 extremely intriguing but it just leaves me FY 2009 FY 2010 FY 2011 with so many question marks.” Source: Company reports Bissett exited its position in RIM by late in Reuters graphic/Stephen Culp 2007 -- around the time RIM briefly became Canada’s most valuable company -- after building it since early 2005. They sold because the price “was “Smart Money” and Research in discounting not only a bright future but an Motion, click here: incredibly bright future in a scenario that http://r.reuters.com/quv38r would have required flawless execution and zero competition to come true,” Caulfield Another giant of the pre-iPhone world, said.