BlackBerry maker’s future looks far from rosy

July 23, 2010

Research In Motion’s future looks bleak. The maker of BlackBerries has a traditional stronghold in sales to U.S. companies. But that has been cracked open. AppleĀ  said this week that more than 80 percent of Fortune 100 companies are currently testing or deploying the iPhone. Meanwhile, phones using Google’s Android operating system appear to be making inroads, too. That spells trouble for RIM.

Corporations and consumers used to be happy with handsets that served up email reliably, promptly and securely. RIM’s devices did this very well, so it sewed up the market. Now, though, Google-powered and Apple handsets now adequately handle email, while also doing much more. For instance, iPhone users can download about 30 times as many apps as are available to BlackBerry users, and the process is more user-friendly.

RIM’s share of the U.S. smartphone market reflects this shift. It fell to 41 percent in the first quarter from 55 percent in the previous year, according to Gartner. The combined share held by iPhones and handsets running the Google operating system rose to 49 percent from 23 percent over the same period.

True, RIM’s sales in overseas markets are increasing, enabling it to hold its share of the global smartphone market more or less steady. Yet handset trends increasingly originate in the United States due to the growing importance of smartphone software.

Moreover, RIM’s overseas push has been accompanied by a sharp fall in the average price of its handsets. While phones are priced differently overseas, the suspicion is the company is losing the pricing power that comes with being the only game in town. Nokia’s troubles — and the decline in its stock price — show that increasing volume doesn’t matter if prices fall too fast.

The BlackBerry maker’s shares may appear cheap. They trade at less than 10 times estimated earnings for this fiscal year. Yet Apple and Google’s dominance in apps means they are becoming de facto standards in the smartphone market. Technology companies that lose such wars often suffer shockingly fast profit declines. RIM still has a shot. This fall it is due to roll out a new operating system, which might help it fight back. But time is running short.

2 comments

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They appear to suffer from putting all their eggs in one basket, and not coming up with a new and better product.

Posted by The1eyedman | Report as abusive

Certainly part of RIM’s decline must be attributed to the horrific product known as “Storm”. Without question, this is the worst phone I have owned, and I have been a Bberry user for a decade. From my co-users, I hear similar issues with the Storm 2. These inferior products turn off users with their buggy touch screens, inability to multi-task, and constant rebooting. In today’s tech world, a single poor product can significantly shrink market share. Two in a row can be devastating. I for one will not be buying another Blackberry product, and I imagine there are many other similarly-motivated consumers.

Posted by tflucht | Report as abusive