BlackBerry’s death greatly exaggerated

It’s the worst of times for Canadian smartphone manufacturer Research in Motion (RIM), developer of the BlackBerry range. Revenues are up and it’s dominating emerging markets. In South Africa, the Sunday Times’ “Generation Next” survey reported it as the coolest brand in the country, where it’s outselling its competitors by almost 10 to one. Spot the problem: in tangible terms, RIM is alive, well and growing – everywhere except in the United States, where it’s lost its grip on the corporate market. And that’s enough for North American analysts to have called the end for BlackBerry.

In February RIM’s stock was trading at almost US$70. By July it had dropped to $26/share. Its market cap, approaching $90bn last year, is now down to $13bn. Yet international revenue is up 67% year-on-year and even in the US it’s up 16%. Can the manufacturer’s future really look that bleak?

According to the naysayers, RIM has lost the plot, missed the point with smartphones and its joint CEOs are fighting. It isn’t innovating or getting to market as quickly or effectively as Apple or the slew of Android device manufacturers. And some of that’s true. But it isn’t affecting sales.

“Capital markets are clearly not always connected to reality,” says Patrick Spence, RIM’s MD for Europe, the Middle East and Africa, adding: “But we remain focused on what we can control in terms of delivering to customers. Analysts are confusing sales with market share. RIM’s sales are holding steady but our market share is decreasing. One of the main reasons for that is the smartphone market is exploding.”

Not long ago BlackBerry was the only smartphone brand in the market. Now there are many, many more.

Research and consulting firm World Wide Worx MD Arthur Goldstuck says RIM is effectively being assailed by a mob. “At the moment it’s like a feeding frenzy [among the media], with everyone trying to characterise RIM as collapsing. It’s the diametrical opposite of what’s happening with Apple products. The media became slavishly addicted to the Apple brand, regardless of what it did.”

Adds Goldstuck: “The reality is RIM’s market share is plunging. However, analysts who are only focusing on that are misrepresenting the actual issue. The other factor is analysts and the media are so obsessed with the US market they don’t look at RIM’s success in the developing world. When you look outside North America, Western Europe and the Pacific Rim, BlackBerry is one of the fastest growing smartphone brands in the world.

“Having said that, it can become a self-fulfilling prophecy if RIM’s executives don’t get their act together. Their lack of insight into what’s happening to the brand – and also their lack of insight into their own response to the market – could well doom the brand. RIM needs a shift similar in nature to Nokia’s. They need a massive wake-up internally.”

The Nokia analogy is an interesting one. The Finnish manufacturer is also at an all-time low in terms of market perception. Its strategy – spearheaded by new CEO Stephen Elop – was to partner Microsoft.

And here’s the bit you haven’t read anywhere else (I hope): RIM has the same plan. It brought Microsoft CEO Steve Ballmer on to stage at BlackBerry World in Florida this year, where he announced Microsoft considered RIM to be “a key strategic partner”. RIM has committed to using Microsoft’s service layer on smartphone and tablet devices – without committing to its operating system, as Nokia has.

Still, that places RIM firmly in Microsoft’s camp. The real smartphone war is between Microsoft, Google and Apple because it’s about computing ecosystems and services – not devices. BlackBerry, Nokia, HTC and other manufacturers (except Apple) are foot soldiers in a much bigger war. RIM knows that. It did invent the smartphone, after all. And it would be silly to bet against RIM, even if Wall Street is. If you’re a betting person then RIM at $26/share looks great.