Ron Johnson, the man behind the remarkable success of the Apple Store (NASDAQ:AAPL), recently said that "Mindshare always precedes market share." Since the launch of the iPhone in June 2007, BlackBerry (RIMM) has been losing US mindshare even as they grew their global subscriber base from 8 to 79 million. US subscribers were holding steady at 21 million until early 2011 when RIM and the US carriers had a major disagreement regarding mobile payments. The introduction of the Blackberry Playbook in April 2011 further deteriorated carrier relations. A free tethering feature for consumers called Bridge, that carriers could neither detect nor bill for, ensured that carriers would be denied the astronomical data fees they were accustomed to receiving on other tablets.
US carrier support completely collapsed when RIM launched the current lineup of BB7 phones. The new phones were the polar opposite of the data hungry iPhone and Android beasts that carriers needed to pay for expensive LTE networks. For RIM, the decision not to release an LTE product was a costly one, but was logical for many reasons. By early 2010, RIM's management knew that their old messaging centric OS could not compete in a multimedia world and they had started on an ambitious project to create an entirely new smartphone paradigm. Instead of pursuing LTE on a less than ideal platform, they made a big bet on NFC. With NFC they believed that they could leverage their legacy operating system and enterprise strength to create market for building access and later mobile payments. The problem was that none of the NFC infrastructure needed was in place to support these initiatives and their enterprise dominance was weakening.
While it's true that RIM's management had indeed executed horribly during 2010 and 2011, they did do some important things right. Even as short-term execution suffered, all of their best resources continued to be directed to getting BB10, their state of the art OS, to the finish line. If they truly believed that BB10 was going to be a game changer, then the short-term pain was justified.
It all started with their purchase of QNX, the leader in real time embedded operating system deployment in April 2010. They continued with The Astonishing Tribe, a company known for squeezing every last bit of computing power out of devices to make beautiful user interfaces. So beautiful, in fact, that Google (NASDAQ:GOOG) commissioned them to create the first all touch Android user interface. A long list of smaller acquisitions was completed to ensure that BB10 smartphones will know what users want before users do.
BlackBerry fans and skeptics around the world have seen just some of the unique features of BB10 and their enthusiasm is spreading. Even the US media is taking a second look at RIM and the news is encouraging. RIM's recent results add even more evidence that they are in a very strong position to launch BB10. During the third quarter, they not only grew cash reserves by an impressive $600 million to $2.9 billion, but they managed to keep their 79 million subscriber base largely intact. All this occurred while selling 15 month old hardware. If BB10 lives up to its potential, RIM could have a major coup on their hands.
Disclosure: I am long RIMM. 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.