4 ways for BlackBerry to stay aliveMarch 29, 2011: 1:04 PM ET
Despite losing ground to Apple and Android devices, calls for RIM's demise are premature. But the company has to make some changes to move ahead.
FORTUNE -- It's become pretty easy to take pot shots at RIM, the makers of the once iconic and still formidable BlackBerry. While consumer-oriented companies like Apple (AAPL) and Google (GOOG) experience high double-digit growth with smart phone adoption, RIM's (RIMM) market share, at least domestically, continues to erode. Last week, the BlackBerry maker warned of lower earnings and revenues for the first quarter of the year. So despite a 32% jump in profit for the fourth quarter of 2010, shares fell 10% in after-hours trading.
Analysts, particularly in the U.S., weren't impressed.
"Management tends to over-promise, but we have heard about exciting products for the past two years, while the reality is leaning more towards sub-par products that are selling poorly and the only ray of light is in places where RIM competes on price, in the low end market," Bank of America researchers wrote afterwards. Critics, like Allegis Capital general partner Jean-Louis Gassée in his blog post, "RIM: The inmates have taken over the asylum," went as far as spelling out the likely path of the company's demise.
The company doesn't have to succumb -- it's still got several key advantages in the marketplace, not least of which is its reputation as the enterprise go-to for over a decade. But to remain competitive in the increasingly fierce smartphone and tablet markets, the company should focus on a few things right now:
1. Letter to management: Clarify your strategy
For years, RIM has been run co-CEO Jim Balsillie and President/co-CEO Mike Lazaridis. Balsillie has been with the company since 1992 and focuses on corporate strategy, business development, marketing and sales. Lazaridis, who founded the company as a college student and remains the more media-friendly exec, handles product strategy and development.
During a Bloomberg Businessweek interview last fall, Lazaridis discussed the transformational shift in mobile, thanks in large part to the rise of the app ecosystem. Warning: you might want to skip over this quote:
"There's tremendous turbulence in the ecosystem, of course, in mobility," he remarked. " And that's sort of an obvious thing, but also there's tremendous architectural contention at play. And so I'm going to really frame our mobile architectural distinction. We've taken two fundamentally different approaches in their causalness. It's a causal difference, not just nuance. It's not just a causal direction that I'm going to really articulate here—and feel free to go as deep as you want—it's really as fundamental as causalness."
Is he a brilliant executive? Absolutely. But clear and approachable to investors and customers? Well, maybe not as much.
Some critics have drawn a comparison between Lazaridis' approach to his discussion of the company and its products to Steve Jobs, who drops words like "magical" in his unveilings. Jobs may veer too far in the other direction, but is undoubtedly an effective communicator. Jobs may be accused of exaggerating and even in some cases fibbing on Apple's behalf, but he's rarely misunderstood. Lazaridis may do well to rethink his delivery, or accept a role that doesn't put him in the spotlight.
2. Transition smoothly (and quickly) to the QNX operating system
RIM's first serious tablet entrant, the PlayBook, launches April 19, and depending on which analyst you ask, they're neutral or dubious about its potential.
"Management sounds very confident in the success of the PlayBook though we believe given the heightened competition in the tablet space, much uncertainty exists as to how successful RIMM will be," wrote a UBS analyst in its earnings call report. "We also remain somewhat unclear about RIMM's PlayBook strategy."
When it launches, first in WiFi-only flavors priced to match the iPad, the Playbook will run a new OS called QNX, bought from Harman Industries (HAR) last year, which the company says will find its way into all of RIM's devices.
There are two problems with that: first, if Allegis's Gassée is right, development tools for QNX that would enable high-performance native applications won't be ready in time for the April 19 launch, meaning it will be a while before any sort of QNX native app ecoysystem becomes a reality. As a stop gap of sorts the company is using "app players" to allow non-native QNX apps, including Android apps, to run. That sounds like a great thing in the short term, assuming Android apps run smoothly, but it also sounds like it could be trouble for the long haul. The longer it takes for full QNX tools to get out there, the more likely users and some developers will just shrug their shoulders and content themselves with Android apps, of which there many.
Second, despite the revelation that QNX will become BlackBerry's OS of choice, there's news that the company is also working on BlackBerry OS 6.1 for smartphones. Confusing? You bet. Some industry watchers might think of Nokia (NOK) making a big deal of MeeGo as its OS of the future, while still releasing and updating Symbian-based hardware. And we all know how that turned out.
QNX is far from a sure thing, but if that's RIM's chosen platform, they had at least better hustle to get it deployed in a meaningful way, to give it a fair shot at surviving. That goes particularly for smartphones, which Lazardis said would get QNX when dual-core processor versions were ready. Which sort of brings us to our next point:
3. Upgrade the BlackBerry hardware, already!
We're not talking about more RAM and screens that are a hair larger, here. We mean faster, beefier processors and screens that are at least as large as the iPhone's. In years past, the hardware specifications on BlackBerrys could keep up, but it's clear they can't anymore, as evidenced by last year's BlackBerry Torch. The Torch sports a 3.2-inch low-resolution touch screen and a 600 Mhz processor, resulting in a slower user experience that feels decidedly last generation. (The keyboard-less BlackBerry Storm 2, with a larger screen, doesn't win any speed contests, either.)
At All Things D's Dive into Mobile conference last year, Lazaridis fielded a question from a Torch owner and member of the media, who complained about the inclusion of both components.
"First of all, the Blackberry Torch was designed to be a launch vehicle for the Blackberry 6," he responded. "What's happening is this leapfrog effect. That's not saying that we're not planning to put out devices with higher specs. But here's the exciting part. When you use that device and you realize how fast it's reacting to your touches, how quickly it's opening up apps, how quickly it sends the email when you press the 'send' button, how quickly you can move around, you realize the amount of performance that's in that device."
Having spent weeks with a Torch unit, I can vouch for the quality of the phone's build -- really, fewer phones I've handled have felt more solid -- but the sluggishness was noticeable.
It's worth noting that significantly faster processors, though maybe not dual-core, may arrive later this year -- at least if reports like this allegedly leaked product roadmap are any indication.
4. Keep pushing security -- enterprise users demand it
At one point, owning a Blackberry was a status statement. Now, the company's biggest asset is its reputation of security among CIOs who buy thousands of the devices for their companies. Yet security is an selling point that the company failed to capitalize on when app-rich, feature-heavy mobile operating systems like Android and iOS came along, and both competitors have made major inroads with enterprise users.
Last fall, RIM ran into a major issue with security when the United Arab Emirates, which claims a half million Blackberry users, threatened to ban service to local subscribers. At the time, RIM appeared unwilling to bow to requests that it allow user information to be accessed by the local government. Lazaridis remarked in an interview earlier this week that while BlackBerry's user data is usually encrypted, so is just about everything else on the Internet. Said Lazaridis: "This is not a BlackBerry-only issue. If [these countries] can't deal with the Internet, they should shut it off."
In the end though, what could have been a victory for Blackberry, at least in terms of marketing, became a moot point and Lazaridis' bold words became just talk. RIM and the UAE reached a compromise whereby the company would comply with UAE regulations, the terms of which have never been disclosed.
More from Fortune: