BlackBerry's corporate problem

April 6, 2010: 1:12 PM ET

BlackBerry's rise was tied to its ability to play well with big companies. Will that also cause its fall?

Since missing on its fiscal fourth quarter earnings, investors have sent Research In Motion stock down almost 9%. But that may be the least of the BlackBerry-maker's problems. The company that popularized the smartphone as the must have gadget for the enterprise worker (remember the whole crackberry era -- it sounds so quaint now) is losing ground to Apple's iPhone (AAPL), and a slew of devices based on Google's Android (GOOG) mobile operating system. Unless it can bring some luster, and some lust back to the brand, it's not hard to imagine RIMM (RIMM) ending up on the heap of formerly dominant tech companies including Palm (PALM) and Motorola (MOT) that are struggling mightily just to survive.

Consider a recent study by marketing research firm Crowd Science, which found that nearly 40% of BlackBerry users would switch to Apple's iPhone as their next smartphone purchase, and 33% of them would switch to an Android phone if given the option. Brand loyalty? Hardly.

There is still a large population of people that are not interested in a spiffy, smartphone at all, says Crowd Science CEO and co-founder John Martin (which is why Nokia (NOK) is still in business). But for those who are, the choice increasingly comes down to Apple or an Android-based phone, not a BlackBerry. "It seems that BlackBerry perhaps falls into this middle category," Martin says. "It's not the same kind of device, and people are not sure what that means."

Sales in the most recent quarter reflected that confusion. RIM shipped 10.5 million devices, below the 11 million expected. And pricing power is falling. RIM brass expects its average price to fall between $305 and $310 per phone in the current quarter, versus an average of $311 per device in the fiscal Q4. Not the direction you want things to be headed when new Android devices from all sorts of manufacturers are popping up weekly like spring poppies, and it seems that Apple's iPhone will be offered by the nation's No. 1 wireless carrier Verizon soon.

RIM Co-CEO Jim Balsillie promised analysts that his company has plenty of devices up its sleeve that will blow everyone away. If that is true, they better be sleek and sporting touchscreens. Even then, it's clear that having a nifty piece of hardware is no longer enough to compete.

As Apple has shown, and the fast charging Android OS has mimicked, an application ecosystem for devices is equally important, especially one that can bridge work and play. That ecosystem barely exists for BlackBerry, and what apps they have are profoundly mired in the workplace. Somehow, RIM in its focus on enterprise customers missed that it was the consumer driving the smartphone market. When Web-based applications are easier to configure and use, does anyone but the IT department care about servers for BlackBerry email?

Meanwhile Apple with the iPad (and soon Google) is extending its mobile OS beyond just phones, and you can bet it will go other places, your car, your TV, you name it. RIM doesn't have an answer for that yet, and the longer it waits to deliver one, the more its customers are going to hang up.

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About This Author
Michael Copeland
Michael Copeland

Michael V. Copeland joined FORTUNE as a senior writer in September 2007. Copeland has covered everything from electric cars to e-readers. He is a creator of Tech Mate, an irreverent video series in which he debates (and skewers) digital issues of the day. Before joining FORTUNE, Copeland was a senior writer at Business 2.0. Copeland graduated from the University of Pennsylvania.

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