Shareholders Ask Is it Time to Sell? RIM Needs to Take Action
Just a couple of months ago we were asking is BlackBerry dead? Since then they’ve released an updated batch of BlackBerry phones, but they’ve also had to deal with a lot of negative press and some internal problems. The latest upset for RIM concerns an open letter from the CEO of Jaguar Financial Group, Vic Alboini. He has the support of a group of shareholders (still less than 5%) who feel that the company has to take action to arrest the declining share price. It looks as though they would prefer some quick measures to maximise the share price and a sale of the company before the market value declines any further.
How Bad is the Share Price?
You can understand the frustration here, especially when you consider that RIM shares have gone from a high of $149.90 in June 2008 down to just $29.52 today, 9th September 2011. The shareholders have got to be looking at the healthy state of Apple shares in a growing smartphone market and asking what went wrong with RIM?
While the BlackBerry brand is in decline, RIM still holds an impressive portfolio of patents. In light of the Nortel patent acquisition, and the surprising $12.5 billion acquisition proposal from Google to take over Motorola Mobility, some of the shareholders feel that RIM could leverage their patents to obtain a decent market value.
What Went Wrong?
How could RIM allow their market share to fall so rapidly? The list of things that went wrong is long, but in a sentence – they failed to innovate and allowed their competitors to gain a major advantage.
The BlackBerry brand helped to popularize the smartphone. The market for smartphones has been growing year on year and RIM was well placed to take advantage. They should have been able to capitalize on that position.
In effect they have been slow to market with their new lines. They have released products that are inferior in terms of hardware when compared with high-end Android smartphones, the iPhone and even the new Windows Phone 7 devices. Perhaps more damaging, they have failed to understand the new demand for apps. The overall number and quality of the apps on the BlackBerry OS is way below what you’ll find on Android and iOS. RIM has also failed to engage with developers to create new exclusive apps that could attract customers. Even if you look at the growth in apps for the relatively new Windows Phone 7 platform you can see how badly BlackBerry is lagging.
The problem is that developers have little incentive to develop apps for BlackBerry when they can find a bigger market elsewhere. Microsoft is bending over backwards to help app developers and attract them to the WP7 platform. They are offering free tools and support. This is an approach that RIM should have considered.
Who is to Blame?
Well, Mr Alboini isn’t mincing words when he lays the blame for RIM’s current predicament squarely at the feet of the board, and specifically the CEO and Chairman. It’s tough to argue with this assessment. They can’t say they weren’t warned about their failure to innovate and keep up with consumer demands. There was the open letter from a RIM employee just a couple of months back that put across a coherent argument and plea for change.
Realistically they should have taken more positive action long before that. They have presided over a company that was in a very strong, apparently unassailable position as a smartphone market leader and allowed it to fall into a downward spiral. They’ve been slow to act, slow to update the BlackBerry range and they’ve failed to capitalize on the growing app market.
They have also allowed the USPs of the BlackBerry range to be slowly eroded. There are devices out there with similar form factors that are much cheaper and there are new messaging apps and services that can compete with BlackBerry Messenger. They still have a hold on the business market with their secure email and document support, but the BlackBerry brand is becoming less distinct.
Is it Too Late to Turn this Ship Around?
The forthcoming QNX BlackBerry devices could change the playing field significantly. This new line of smartphones running the QNX platform will be compatible with Android apps. This will give anyone who buys one of the new BlackBerry phones access to a wealth of apps and games. It would at least deal with the app problem, but when are they coming and is it soon enough?
You also can’t discount good old consumer loyalty. Although BlackBerry smartphones are no longer as popular as they once were, there is still a significant fan base there that would prefer to buy a BlackBerry. In the right hands the brand could surely be turned around. If that’s going to happen, it needs to happen now.
You’ll find no shortage of companies that could be interested in acquiring BlackBerry and the patent portfolio is a real carrot with the patent wars that are currently raging in the courts. There are also a couple of companies who seem keen to move into the mobile space, but haven’t met with much success yet – I’m looking at you Dell and HP.
Realistically, Apple could afford to buy BlackBerry, but it wouldn’t fit their focus on the closed iOS ecosystem and they certainly wouldn’t do it just to kill off the brand. Google could be slightly more likely, but if the Motorola deal goes through they wouldn’t have the same incentive to bolster their patent holdings. That leaves Microsoft, and it’s tough to see them making the move because of their recent partnership with Nokia. It’s possible if the new Nokia WP7 devices don’t take off that they could look around for another option, but not in the immediate future.
Time to Sell?
Will RIM bow to shareholder pressure and look at selling out or fight back with some new ideas? A lot will depend on how the rest of the shareholders react to Alboini’s letter. There’s also no doubt that the release of the QNX BlackBerry range is vital for their hopes of recovery. What do you think? Should they look to sell or can they revive the ailing brand? Post a comment.
- Market Watch, http://www.marketwatch.com/investing/stock/rim?countrycode=ca
- Android and Me, http://androidandme.com/2011/08/news/new-qnx-blackberry-phones-to-be-android-app-compatible/
- RIM, http://www.rim.com/newsroom/mediagallery/
- Jaguar Financial, http://www.jaguarfinancial.ca/press_releases/JFC%20PR%20Sep%206-11.pdf