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What Now BlackBerry?

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Until a week ago, Indian kids deftly speed-thumbing their way through messages to their friends were blissfully unfazed by the troubles that were plaguing the maker of their favourite phones. "I love my BlackBerry," they would state, quite simply. The country's Type A personalities also were too busy being hyper-accessible on email to spare a thought for the company that, for years, brought them their email, so efficiently and safely.

And then came the Big Outage. Canada-based Research In Motion (RIM), creators of BlackBerry smartphones, known for their reliability, trusted for the invincible security, was hit by the worst breakdown in services in the company's history, and it spread across the globe like a virus. Though not much is known about the cause of the breakdown, RIM's co-chief executive officer Mike Lazaridis told the media that a hardware problem had caused a backlog of data in the European servers, cascading into further failures.

The outage took so long to sort out that even ardent fans became impatient. When it was all over, RIM offered users, at what is probably a huge cost to the company, a $100 apology package of free premium apps, including games, productivity apps and a virtual assistant to compete with iPhone's Siri.

Misfortune Calling
In the past year, RIM's problems tended to come neither in singles, nor in small packages. If these could be described in one cruel word, it would be ‘ageing'. Although BlackBerry addicts will disagree and deride new-fangled touchphone devices as unnecessarily gimmicky, it is difficult to argue with the dominance of the iPhone and the big sweep of smartphones based on Google's Android operating system, especially in the big US market. RIM's portfolio, in comparison, is thought to be too veteran to compete. On the form front, the BB (as users are fond of calling the BlackBerry) has a solid, comfortable, but clunky design that has remained essentially unchanged over the years.




RIM has been late to the party with touchphones. When it did arrive, it did not offer the same slick experience the iPhone and phones from Samsung, HTC or Motorola did. On functionality, today it is the apps that make the smartphone meaningful, and RIM just did not come in with enough of them — although new apps are pouring in now. Overall, when it comes to innovation, the BB seemed to be playing catch up to new-thing-a-minute smartphones.

And so it was that the BlackBerry began to lose market share — and investor confidence. Data from comScore for the period ending July 2011 pegged RIM's market share in the US cellphones market at 9.5 per cent, while Samsung topped the list at 25.5 per cent. RIM's smartphone platform market share, however, was 21.7 per cent, while Android was at 41.8 per cent and Apple at 27 per cent. Gartner's mobile sales report for Q2 2011 shows Google and Apple together account for 62 per cent of the smartphone market in the US. This is double of what it was in Q2 last year. Android phones are 43 per cent, up from just 17 per cent last year. Nokia's Symbian phones dropped from 40 per cent to 22 per cent, while RIM dropped from 19 per cent to 12 per cent. RIM's shares  had hit a new low bottoming out in the first two weeks of August at $21.60 in contrast with a price of $70 earlier in February. On 21 October 2011, RIM shares closed at $22.30 on Nasdaq.

Traditionally, the US market has set the trend for smartphones and it is where BlackBerrys first became wildly popular. Though RIM is growing strongly in countries such as India, Indonesia, the Philippines and even the UK, it is bleeding in the crucial North American market. And this is showing not just in market share but in its profit and loss account as well. RIM's Q2 results missed analysts' expectations — once again. Earnings were 80 cents a share when analysts expected 88 cents, according to a Bloomberg survey. Revenues were $4.17 billion in the three months through 27 August, lower than the average estimate of $4.47 billion.

Unsurprisingly, RIM's leadership structure of two CEOs is often blamed for the company's inability to move fast and effectively enough. Jim Balsillie and Lazaridis are co-CEOs and co-chairmen at the Waterloo, Ontario-based company, and investors thought it would be better to split the duo up as the company flounders through multiple challenges. There were even murmurs about a change of leadership.
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Lazaridis and Balsillie, however, are the ones who started the company and without them, there could be further chaos. In July, there was a RIM management shakeup and CIO Robin Bienfait had to wear two hats as she was given the responsibility of retaining BlackBerry consumers. RIM also cut its workforce by 2,000 people (11 per cent), leading to questions on whether this was really the solution to its problems and whether it needed more people to innovate or less people to run a tighter ship.

The beleaguered company has also seen many of its key executives jump ship. In July, Ryan Bidan, senior product manager for RIM's tablet, the PlayBook, left to join Samsung Mobile. More recently, RIM lost its director for global developer relations, Mike Kirkup. This comes at a critical juncture in RIM's relationship with its developer community and when innovation in apps is so important to the company's immediate future. Also in early August, Charlie Kindel, who helped lead the company's mobile efforts, left to launch a startup. The desertions continue, the latest being Alex Ivanovic, lead product manager of BlackBerry Business Cloud Services.











"THE SMARTPHONE MARKET IN INDIA IS GROWING AT THE RATE OF 110 PER CENT AND WE ARE GROWING FASTER THAN THE INDUSTRY" FRENNY BAWA, Managing Director, RIM-India

Meanwhile, even RIM's basic reliability was held against them. Recently, the London riots were unfairly dubbed "the BlackBerry Riots" for the ease with which rampaging teenagers managed to use the BlackBerry Messenger to incite and spread vandalism and looting. British Prime Minister David Cameron considered a temporary ban, and the whole issue of the closed, private world of BlackBerry communication being accessible to police and other authorities is being raked up again.

Grudgingly though, everyone has to admit there was not a more efficient and secure system of communication. It was the BlackBerry phone (and pager) that helped many victims during the 11 September attack on the World Trade Center in the US. For instance, physician Sean O'Mara was attending a conference when his BlackBerry email indicator went off. His twin brother was trying to reach him. "As news spread and people tried to use their cellphones and pocket modems, the vulnerability of these devices was vividly demonstrated. In contrast was the device I owned. It provided the opportunity to communicate instantaneously two ways, with my twin and others, information I sought or wanted to pass on. The BlackBerry was different."

Later, when a 5.8 magnitude earthquake hit the east coast of the US, cellular communication was affected. But BlackBerry worked reliably and without interruption. The problem is that the recent outage has called into question even the famed reliability of BlackBerry — the biggest reason to be loyal to the phone.











"TO MAKE UP FOR THE OUTAGE, BALSILLIE OFFERED FREE PREMIUM APPS WORTH $100" JIM BALSILLIE Co-chief executive officer, Research In Motion (Bloomberg)

Better BlackBerrys
Amidst waning investor confidence, bad day after bad day at the stockmarket, and criticism that RIM was doing precious little while Android's army of phones and the iPhone, RIM finally released five new BlackBerrys at a suspecting world. Five Bold and Torch models and variants were duly decked out, equipped with the new BlackBerry OS 7 and looking much better.

The top-end models boasted powerful processors and great hardware. The OS 7 brought integration of the BlackBerry messenger (BBM) with applications, including social apps, giving young peoples' BBM addiction a further shot in the arm. This integration means you could now chat from "inside" your games, apps and social networks. RIM also launched BBM Music, a cloud service where users can share music through a community-based library. Using this service, which has lost a bit of its shine since launch, you could build a music profile of up to 50 songs and share. The new phones also have near field communication (NFC), which will take off soon.

RIM has, obviously, tried to keep everyone happy with its Bold, Torch and Curve launches for all segments of users. There are better business tools working on better screens, good battery life, The WebKit browser is 40 times faster than it was with BlackBerry OS 6, and graphics have improved as well. BlackBerry Balance, which lets a corporate user unhook from the company's data and contacts without losing personal data, has been integrated.












TIMELINE
1984: Mike Lazaridis founds Research In Motion
1997: RIM is listed on Toronto Stock Exchange
1999: Launches Black-Berry phones. Lists on Nasdaq; raises $250 mn
2001: Mobile email patent battle with NTP
2001: BB's performance during 9/11 fetches praise from the US government, police forces
2002: Introduces BlackBerry 6750
2004: Hits 2-million subscribers mark
2005: The number of subscribers cross 5 million
2007: 10 million subscribers. Rivals iPhone and Android OS arrive
2008: BlackBerry Bold, Storm released
2010: RIM buys QNX Software Systems
2011: Subscriber numbers hit an estimated 70 million; PlayBook tablet released; BBX operating system announced


The 7 OS based BlackBerrys were not welcomed by everyone. Some analysts were distinctly underwhelmed, believing RIM to be playing catch-up to Android and Apple's iPhone. The BlackBerry 7 OS was only a refurbished OS6 when what was really needed was a completely new operating system on the phones. Both customers and tech experts believed the long-awaited QNX should have been here by now. At their developers' conference, DevCon, held on 19 October in San Francisco, however, the co-CEOs said 7 OS phones were selling "very very very well". RIM's head of developer relations also pointed out that BlackBerry now had 70 million users worldwide, up from 50 million a year ago.
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For BlackBerry fans wanting to upgrade, there are certainly plenty of options with new models, of which several have been launched recently, including in India. Meanwhile, PlayBook, which RIM depended on to lift its brand and sales, suffered from dismal sales, failing to deliver on many fronts.

India: BB Country
For RIM, the universe seems almost split in half, as it sees exponential growth in India and many other parts of the world, quite in contrast to the battering it has received in the US, and even its own home, Canada.











"THE COMPANY IS INVESTING MORE IN COUNTRIES LIKE INDIA WHERE IT IS GROWING STRONGLY" MIKE LAZARIDIS President and co-CEO, Research In Motion

BW approached a group of smartphone-wielding school kids and asked them what phones they were using. The unanimous don't-ask-stupid-questions answer: BlackBerry. Didn't they want iPhones, we asked? No, they answered unhesitatingly. Most of the school was on BlackBerry. We left them to gossip over how someone's girlfriend wasn't talking to him anymore because she only wanted to BBM, and tried instead to quiz a group of college girls about their phone preferences. There was little need to ask: almost all held on to their BBs for dear life, half-attending to conversations while they frenetically messaged certain someones.

The BlackBerry was not always the young peoples' choice. BlackBerry phones have long been well-entrenched in India's corporate world and this has remained unchanged so far, despite concerns that the government would put a spanner in the works trying to get access to encrypted communication to intercept what it sees as security threats. In the UAE,  RIM managed to avert a ban on BlackBerry. In India, the security tussle remains unresolved.

Assuming all were to be settled amicably on the security front, the BlackBerry is doing remarkably well in India. Says RIM-India's managing director, Frenny Bawa: "The smartphone market in India is growing at the rate of 110 per cent and we are growing faster than the industry. BlackBerry smartphone and applications have seen great acceptance and its popularity is evident through the increased customer base in India and now with the launch of the BlackBerry PlayBook the opportunities are even greater."

And RIM India has worked hard to capitalise on the ground they have gained here. In 2004, the BlackBerry started to became the trusted way for enterprises to get email on the go, with reliability and speed. Add to that tools such as address book, calendar, documents on the go, messaging and that intuitively usable keypad, and it became the perfect little corporate companion. And there is the BlackBerry Enterprise Server (BES) — the platform and middleware that houses services for messaging, collaboration, email and data with unbeatable security levels.











THE HANDSET MARKET IN INDIA
RIM stands fourth in the country
NOKIA: FY2010-11: 39%
SAMSUNG: FY2010-11: 17.2%
MICROMAX: FY2010-11: 6.9%
BLACKBERRY: FY2010-11: 5.9%
HTC: FY2010-11: 1.4%
OTHERS: FY2010-11: 29.6%

Source: Voice & Data, as on June 2011

(BW pic by Tribhuwan Sharma)


Indeed, for a long time, the BlackBerry's only domain was the enterprise. It became synonymous with being a ‘big shot'. Or meant you were doing something right at work. It became what every Indian marketer understands as an ‘aspirational' product. But the BlackBerry wasn't about to be all work and no play. Not with a killer app such as the BBM. RIM, knowing this, began the consumerisation of its smartphones, somehow without compromising on the loyalty of its corporate users. Bawa pegs this down to RIM's ability to deliver the right mix of technology and services for each segment: "We have defined successfully BlackBerry as the ultimate communication device for enterprise as well as individual users. We continue to drive aggressively in both the segments. In the past five months, we have launched five new products in India and have an exciting roadmap for the coming months."

But of course, the launch of the Curve, priced below Rs 10,000, really kicked off the consumerisation. BlackBerrys also went colour, the lilacs, reds and whites signalling they were not just for executives. Indian youngsters got the message. And the messenger. The BBM, Bawa says, is actually the largest social networking tool, particularly popular in India.

RIM India coupled models at every price point with a variety of data plans with multiple carriers. This gave young users more choice and flexibility. They also worked hard on the retail front. Says Bawa: "Retail distribution has played a key role in our overall growth in India. We have been very active on sales and distribution with thousands of retail touch points. With the help of our partners and distributors such as Ingram, Redington and Brightpoint, we have managed to take these initiatives a step forward by setting up ‘BlackBerry Experience Zones' all across India." You only have to walk into a Croma store to find ever-willing shop staff offering to demo a BlackBerry. Traditionally, it has been difficult to see anything but a dummy device in mobile shops.
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Further, RIM India has been working with over 17,000 developers locally to produce apps that are purely Indian. Revamped for the arrival of BlackBerry OS 7, the App World hosts many Indian apps. There is the Conde Nast Traveller, Bollywood Hungama, the snazzy Vogue Stylist, TV on the Go, Cooking with Tarla Dalal, and even a collection of festival apps.

According to a Voice&Data survey, revenues of the Indian mobile handset market grew by 15 per cent to Rs 33,171 crore in 2010-11 from Rs 28,897 crore a year ago. Nokia remained the No. 1 player in handset business in India in FY2010-11 with revenues of Rs 12,929 crore, showing a growth of only 0.2 per cent over FY2009-10. It lost market share in the low-end segments to home-grown handset makers such as Micromax, Karbonn and Spice, while its high-end phones faced tough competition from Samsung, BlackBerry and HTC. For FY2010-11, Nokia has a market share of 39 per cent. Samsung followed with revenues of Rs 5,720 crore and a market share of 17.2 per cent.

BlackBerry ranked among the top 5 mobile phone brands in India. Positioning itself at No. 4, the BlackBerry clocked revenue of Rs 1,950 in FY2010-11, up 61.2 per cent from Rs 1,210 in FY2009-10. Its entry-level smartphone saw more sales in the fourth quarter than all the other three quarters put together. The company grabbed a market share of 5.9 per cent. According to CyberMedia Research, in spite of 2009 being a poor year for the global information and communications industry, BB shipments recorded a healthy 87 per cent year-on-year growth in India, though on a small base. A market revival in 2010 saw BB shipments shoot up over 300 per cent y-o-y. CyberMedia analysts expect BB shipments over 2011 to comfortably cross one million units; the CAGR for India shipments of BB devices for 2008-11 would be a healthy 100 per cent plus.

The BlackBerry pie is, perhaps, even larger in traditional BlackBerry kingdom Indonesia. Here too, RIM is focusing on the consumer segment that cares more about the BBM than secure corporate email. Other aspects of the strategy followed in India may well be an echo of the Indonesian picture. Dropped prices for certain models, flexible data plan options including pre-paid, and super local apps are helping RIM fuel growth in Southeast Asia. According to media reports, BlackBerry's one million devices in Indonesia two years ago now stand at five million. Unlike in the North American market, RIM's smartphone market share jumped to 47 per cent in Indonesia from 9 per cent, according to market-research firm Canalys.

The BlackBerry smartphone, specially the Curve, has been a top seller in Thailand and the Philippines, too. According to technology market researcher IDC, over Q1 CY11, BlackBerry was the No. 1 smartphone vendor in Latin America with 48.5 per cent market share. BlackBerrys are also doing well in the UK. According to GfK Retail and Technology, BlackBerry was the No. 1 smartphone vendor and the No. 1 prepay smartphone vendor in the UK in June 2011. Over the month, the Curve 8520 was the best selling prepay phone in Great Britain. Because of emerging markets showing a greater uptake for BlackBerry devices now, RIM allows little lag between global launches and local releases.

In the process of reaching out to individual users, RIM has not forgotten its enterprise market. The firm has launched as many products for business users, notably the most recent Bold 9900. It is the integrated ecosystem of hardware, software and services that makes enterprise rely on RIM. With the enterprise mobility segment poised to grow exponentially to a $1-billion market, according Zinnov Management Consulting, it is exactly what RIM needs. In India, RIM has not dropped the ball where its business users are concerned. Whether it is new devices or applications on its smartphones and the PlayBook, or various conveniences such as the BlackBerry Balance feature, RIM continuously works with partners to expand the enterprise offering beyond email and messaging. These offerings span across small businesses to large ones. In the US, RIM has been losing corporate customers, and the recent outage has shaken the trust of businesses that have relied on RIM's products and services. As the consumerisation of IT begins to impact IT plans, RIM will need to prove its superiority in a space, which it once owned.


Thanks to pre-launch hype, it seemed like the PlayBook would be the iPad killer. But when it was launched in April 2011, the PlayBook did not have data connectivity of its own other than WiFi, had buggy software, sparse apps, and was missing native email and messaging. Users would need to bridge with a BB phone via Bluetooth to get to their email, etc. It did, however, showcase RIM's QNX OS and a slick user interface that allows fast multi-touch and multi-tasking in a way that the iPad could not. It supported Flash. And had an impressive hardware. But all this was not enough to let the PlayBook eat even a bite of the iPad's lunch. In the past quarter, PlayBook sales were 1 to every 19 iPads sold. RIM has been fixing some of the problems with software updates, more apps and so on. In India, the PlayBook was launched in June. RIM-India says it hopes to capture buyers from among its loyal fans.











A TAB TOO LATE
Thanks to pre-launch hype, it seemed like the PlayBook would be the iPad killer. But when it was launched in April 2011, the PlayBook did not have data connectivity of its own other than WiFi, had buggy software, sparse apps, and was missing native email and messaging. Users would need to bridge with a BB phone via Bluetooth to get to their email, etc. It did, however, showcase RIM's QNX OS and a slick user interface that allows fast multi-touch and multi-tasking in a way that the iPad could not. It supported Flash. And had an impressive hardware. But all this was not enough to let the PlayBook eat even a bite of the iPad's lunch. In the past quarter, PlayBook sales were 1 to every 19 iPads sold. RIM has been fixing some of the problems with software updates, more apps and so on. In India, the PlayBook was launched in June. RIM-India says it hopes to capture buyers from among its loyal fans.


Future Course

No crystal ball could predict the future for RIM. Fresh in everyone's memory are two recent events: the outage, and the unveiling at the developers' conference of the BBX operating system, which RIM says will power its tablets and smartphones. But there several other factors polarising views of where RIM is headed.

Many are pointing out that the ‘new' BBX is not so much new as it is a mash up of the existing 7 OS and QNX — unifying to catch up with the single-system-for-all-devices approach already being taken by Apple iOS 5, Windows 8, and Android's new Ice Cream Sandwich. The BBX will have a slick and impressive 3D-enabled UI, but RIM has given no specific timeline for BBX to arrive. Another question is whether any of the existing phones could upgrade to the new system. RIM says BBX will support Android apps on the new PlayBook and BlackBerry phones, but no one is taking this for granted given the company's recent failures to deliver. There is also the question of how the inevitably fuzzy boundary between Android and BBX will then be perceived.

Even before the services blackout, numerous surveys in the US showed users wanting to consider another phone for their next purchase. There are still dedicated fans, however, one of who decided to jump off a plane (sky diving) to show his support for the BlackBerry brand which, he said, was plummeting down to the ground, and needed its fans to speak out. RIM plans to spend more and increase its activities in countries, such as in India, where it is growing, but whether this will be enough to counteract its constellation of problems is uncertain.

Meanwhile, RIM's financials are getting weaker and few are interested in its stock. Many feel the biggest battle RIM is fighting is its own falling share price. PC World's Tony Bradley described the RIM state of mind in July: "RIM right seems like a house of cards on the verge of collapse while the execs sit in the board room on the top floor admiring the view."

Today, those execs are no longer the billionaires they used to be. Over the past three consecutive quarters, their stock has dropped to half its value. While there is a bright side to BlackBerry in India, SouthEast Asia, Latin America, Africa, Western Europe and even the UK, it is in that other half of the world where it came from, that RIM needs to prove itself beyond a doubt. Meanwhile, the competition is only getting more fierce and eating into domains like the enterprise once wholly owned by BlackBerry and BES. RIM can no longer afford to get one little detail wrong or do anything too little too late, at a time when every negative event gets spotlighted and magnified for all to speculate over.

That said, few believe it is the end of the road for the company. Available in more than 175 countries, working with 500 plus partners, including carriers, riding both enterprise and consumer segments, and growing in the most populated places on the planet should surely provide the company strong basis for recovering from its current difficulties.

mala(dot)pobox(dot)com, (at)malabhargava on Twitter

(This story was published in Businessworld Issue Dated 31-10-2011)