On November 12th, Research in Motion (RIMM) announced that it would launch its BlackBerry 10 on January 30, 2013. In response, shares jumped 6% from their Friday close of $8.54 to Monday's open of $9.05, but pulled back slightly to $8.81 before market close. The market's positive reaction to the announcement is due to the fact that RIMM has delayed the launch of the BlackBerry 10 -- a product that is widely thought of as RIMM's last shot at redemption -- not once, but twice now; and it's just reassuring to know that there is now a set date for something to happen. But despite the back rub from RIMM's launch team, I am still bearish on RIMM's near-term prospects.
Being that the BlackBerry 10 is a "bet the company" product, I look specifically at two things that will determine the product's success following launch:
- Brand: How do consumers perceive the BlackBerry?
- Value: Can the BlackBerry deliver something to the user that current smartphones do not already offer?
From 2011 to date, what was once affectionately known as the "CrackBerry," experienced a marked drop in US market share, falling from nearly 50% to 1%. Furthermore, the Company's only markets (India and Indonesia) where the phone is still relevant are giving way to other players such as Samsung, HTC, and Sony. In the US, the only remaining users of the smartphone are employees in more traditional industries such as government, financial services and legal -- and even these people have a separate personal phone (probabilities would suggest that it is not a BlackBerry).
The decline in market share, most likely due to the stream of releases of BlackBerrys that offered little more than marginal redesigns, has been extremely damaging to the line's brand - and when it comes to consumers (individual or enterprise), brand can count for a lot. This damage is painfully clear after a quick glance at the Company's balance sheet: RIMM has been consistently writing down its goodwill from its high of $508 million in 2011 to $0, where it stood as of Q1 2013. If the Company is to make a turnaround in the eyes of the consumer, and thus benefit from heightened sales, the Blackberry 10 had better be a damned good phone that's capable of impressing techies and their followings.
But the BlackBerry 10 seems sufficient at best. Reading Monday's press release from the Company made me feel like I was watching the trailer for an upcoming comedy: you see the trailer, you chuckle at one or two clips, and you make an objective decision not to watch the movie when it comes out. Why? Because you know the trailer is a hodgepodge of the most hilarious moments that the movie has to offer; and you don't believe that the added benefit of 1.5 hours of character development and context are going to be what makes that movie a side-splitter. RIMM's press release is no different.
There are some cool features in the new handset, but they are nothing that current smartphones can't already do / don't already offer:
Blackberry Flow and Blackberry Hub: "All messages, notifications, feeds, and calendar events come into the BlackBerry Hub and no matter what the user is doing with the device, with a simple gesture, they can peek into the Hub at any time"
Oh. Cool. Sounds like the swipe-down menu from Apple's iPhone.
BlackBerry Keyboard: "Learns how you write and adapts to how you type so you can write faster and more accurately, giving you the kind of legendary typing experience that only BlackBerry can deliver"
Doesn't specify exactly how they do this, but it sounds like a combination of autocorrect and the Swype app currently available for Android phones. I'll refrain from commenting on the line: "...legendary typing experience that only BlackBerry can deliver."
BlackBerry Balance: "Offers the most elegant way to satisfy both customer and corporate needs without compromising on either."
This is the one actually cool feature that RIMM offers with the 10 - a partition in your phone that allows you to conduct personal and professional tasks completely separate of one another. Having been in investment banking in a past life, to carry just one phone around while not in the office instead of two would've made my morbidly sad life that much less sad. However, with an increasing number of corporations, and even federal agencies, running for the exits (or with one foot already out the door via the Good app), RIMM might be offering too little, too late.
On top of trying to convince the layperson that they should take a chance on a name that has become associated with "work phone" in recent years, there is the added problem of creating an ecosystem of apps that users would be willing to ditch their current smartphones for. RIMM has decided to do this by trying to incentivize developers with cash and gadgets to port or create games for the 10 during a "36-hour Port-a-thon". During the event, for each app that a developer gets approved, he/she is awarded $100; if a he/she gets two to five games approved, they get the added reward of a BlackBerry Playbook tablet. But the apps on current iOS and Android phones aren't created in a 36-hour period, they're made by teams of coders over a long period of time. To me, this looks like RIMM throwing money at developers so that when the 10 debuts, management can cite a number that they can attach to their collection of apps in their ecosystem, without speaking for the quality of the apps.
When Google (NASDAQ:GOOG) entered the mobile market, it also struggled with the number of apps it offered versus Apple's (NASDAQ:AAPL) iOS. RIMM is in a similar position today, with a few glaring differences: The app market has grown exponentially since Google's foray into the market, the competition is not just Apple anymore (MSFT and GOOG are now both firmly in the mobile market), Google had more buffer room for mistakes at the time, and Google was sitting on about $44 billion of cash whereas RIMM only has around $2 billion (when you include their short-term investments). If you can ignore all of that, then it looks like RIMM is in good position to claw itself back onto the playing field.
In summary, I go back to my initial two questions: Is the BlackBerry perceived positively by consumers, and can it give consumers anything that they're lacking from their current smartphones? The brand is not viewed favorably anywhere except for developing countries and although RIMM is finally releasing a phone that has new features that past models didn't have, in the grand scheme of smartphones, it's nothing revolutionary. The best case scenario for the 10 is that it matches what current smartphones can already do; ignoring the possibility for yet another delay, the worst case is that the BlackBerry 10 still completely lags its competitors. Realistically speaking, it's probable that the 10 will fall somewhere in the between the two scenarios, but with phone upgrades every two years and high-profile / highly anticipated releases like the Apple iPhone 5 and Motorola Droid RAZR HD happening before the end of 2012, why would a consumer take a risk on a BlackBerry?
Disclosure: I am short 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.