RIM's New Handset - Why I Am Skeptical

| About: BlackBerry Ltd. (BBRY)

Research In Motion (RIMM) announced today that it will hold its BlackBerry® 10 launch event on January 30th, 2013. The event will happen simultaneously in multiple countries around the world. This day will mark the official launch of its new platform - BlackBerry 10, as well as the unveiling of the first two BlackBerry 10 smartphones. Details on the smartphones and their availability will be announced at the event.

The new BlackBerry 10 operating system (OS) will compete with Apple's (NASDAQ:AAPL) iPhone, Google's (NASDAQ:GOOG) Android OS, and Microsoft's (NASDAQ:MSFT) new Windows Phone 8.

What does it offer?

As we all know, RIM has made its fortune serving the enterprise. It should come as no surprise then that they will offer some unique features targeted for this audience.

Their press release notes:

BlackBerry Hub allows users to quickly view all messages, notifications, etc. with a simple swipe. This, however, does not seem much different than the iOS Notification Center, and established Android features.

BB Keyboard is supposed to learn form your typing habits. Yet once again, this does not - on the surface at least - appear to be significantly different from existing systems.

BB Balance - This does appear to be to be a significant innovation. Essentially, it divides your phone into 2 phones - your personal phone and your business phone "and never the twain shall meet." All your business apps, contacts, etc., etc. are in a separate area from your personal items, and communications between the two are limited. Additionally, in a BYOD enterprise, IT has the option of wiping the business side of your phone, should it be deemed necessary, but this will leave your personal side unaffected.

The Telegraph notes:

RIM has thought this through impressively - you can't accidentally cut and paste from a work email to your personal account, or mix up your business and personal apps. When you have a personal app active, if you've been playing a game, say, the work apps are grayed out on screen. There are even two separate App World stores.

This feature, coupled with very strong security features for which RIM is traditionally known, should be a huge plus for the phones.


Rumors are that "Techbyte has seen several of them, behind closed doors, and they are surprisingly glamorous, slick, slim and unmistakably 'BlackBerry' to the core."

Where did RIM go wrong?

RIM has charted an almost unprecedented collapse from a high of about $140, to a recent low of $6.22 (Friday close was $8.54). (One other crash was Palm, eventually bought by HP (NYSE:HPQ) which also failed to compete with the iPhone.)

As Bloomberg notes:

With the announcement, RIM moves a step closer to finally introducing the new smartphones after at least two delays put the devices a year behind schedule.

This brings me to the point that I have made frequently over the years:

  • Operating Systems are difficult things to create!

Businesses that do not recognize this are in for a rude surprise.

Apple had a huge advantage over almost everyone (a possible exception being Microsoft), in that it was able to convert its already advanced, stable OSX, and all its associated tools, to serve as the basis for its iconic iOS that runs its iDevice family. This provided a solid core and further development produced a surprisingly robust first edition of the iPhone.

The ease of use of a well designed interface lures people into thinking that it is easy to do. But nothing is further from the truth. The modern OS has literally man-centuries of labor into it. And a lot of this takes time. You cannot just throw more people on the problem. It just takes time for code to mature by going through numerous cycles of testing.

As noted in another post that explains in detail the cause of the collapse, RIM fell apart because it failed to realize the innovation of the iPhone. In repeated quotes, the twin CEOs repeatedly made total fools of themselves as they clearly were suffering from a severe case of denial. To wit:

[Apple and the iPhone is] kind of one more entrant into an already very busy space with lots of choice for consumers … But in terms of a sort of a sea-change for BlackBerry, I would think that's overstating it."- Jim Balsillie, February 2007. [ref]

Almost six years later, RIM is trying to battle its way back onto the playing field. But it has several very strong headwinds to face.

It is now player number 4 on the field (after Android, iOS, WinMob 8). Everybody talks about choice, but in the end what people want - particularly in business - is sameness. History has proven this no more clearly than the example of how MS Word took over the word processing software industry virtually eliminating the competition. It was not that Word Perfect was particularly inferior, it was that industry wanted ONE established product so that workers could effortlessly move between jobs. In the end, business believed that granting MSFT a monopoly was less expensive than either retraining or maintaining dual word processing systems. The same occurred in the Windows™ OS vs. Mac OS. The former took over almost exclusive dominance in part because once it achieved a dominant position, industry moved to standardize. This in spite of the fact that the Mac continually offered a total operating cost (TOC) way lower than that of Win PC.


And so today the question remains to be seen whether BlackBerry can achieve significant gains in a crowded field that really eschews diversity.

Much of this will depend on how well they can deliver on their promise of a solid platform.

  • Is the Hardware really that good?
  • Is it solid and durable? (The iPhone apparently can survive intact a drop from about six feet high.)
  • Is the OS solid?
  • Is it fast and fluid?

Consumers will tolerate a certain amount of bugs in a first version, but if the OS turns out to be intolerable, or fixes are a long time in coming, then the system will be

Personally, I am skeptical that RIM can pull this off. In the past they have made disastrous errors in this field. In following their own OS, they allow for significant differentiation of their product, but leave themselves open to the danger of poor implementation, and even worse, marginalization. I still feel they should never have rejected Nokia's offer to join forces on the MeeGo platform. Together they would have been a formidable team.

That said, they certainly will find some limited success with the remainders of their once strong fan base. Additionally, the innovative features may be enough to push their platform forward.

However, the key points in their success will be two:

  1. The quality of their product, and
  2. Whether there is perceived a sufficient level of differentiation to warrant the investment in supporting a fourth platform.


I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.