Research in Motion (NASDAQ: RIMM), Canadian maker of the BlackBerry, on Thursday warned investors that disappointing shipments of its flagship smartphone will result in lower-than-expected earnings for the current quarter.
Wall Street reacted sensibly and predictably, with RIM shares falling as much as 17 percent (!) in extended trading to 46.90 from Thursday's closing price of 56.59.
Once considered the gold standard of smartphones -- especially in the corporate sector, where jokes about the addictive "CrackBerry" were common -- the BlackBerry has seen its market share erode faster than Lindsay Lohan's acting career in recent years as first Apple's iPhone, and then devices powered by Google's Android OS, have stolen its thunder and cachet. (Seriously, when was the last time you heard a "CrackBerry" reference?)
Four years ago, the BlackBerry was the smartphone market leader. Now it's in third place and sinking fast. Just look at research firm NPD Group's latest first-quarter mobile OS numbers for the U.S. market:
* Android, 50% (down from 53% in Q4 2010)
* Apple's iOS, 28% (up from 19%)
* BlackBerry OS, 14% (down from 19%)
How is a company with a market cap of $29 billion going to rebound against giants such as Apple (worth $319 billion) and Google ($135 billion). By making better products? By getting those products to the market faster? Sure. Those would be two great ways.
But RIM's not doing that. Instead, it's falling behind in mobile technology. Worse, fewer developers are interested in writing apps for BlackBerry. A new survey conducted April 11-13 by IDC and Appcelerator shows that:
* 91% of developer surveyed are interested in iPhone development, with 86% interested in writing apps for the iPad
* 85% are interested in developing Android phone apps, with 71% eager to write for Android tablets (both numbers are down slightly from Q1, mainly due to platform fragmentation concerns)
* 29% of developers surveyed earlier this month are interested in writing apps for Windows Phone 7, down 4% from the first quarter
* 27% are interested in developing for BlackBerry OS, down from 38% in Q1
That's right. BlackBerry's OS has been surpassed in developer interest by a mobile operating system -- WP7! -- that for all intents and purposes won't even have products on the market until 2012.
I had a BlackBerry for two years and liked it quite a bit. Then, about six months ago, when my contract was up, I decided to try an Android. It's vastly superior. The iPhone also is vastly superior.
That's not just me talking. Does anyone know a person who switched from a BlackBerry to an Android or iPhone, and then switched back?
Then there's the PlayBook, released earlier this month. It's a slow-motion disaster. You have to tether it to your BlackBerry to get email? Are you kidding? How's a tablet like that going to compete against Apple's iPad or any number of devices powered by Google's mobile OS? I know there's a lot of pressure to get products out to the market, but it really is a good idea to finish them first.
Maybe none of this could have avoided. There's such a thing as being outperformed by a competitor, especially one with greater resources and a superior ability to attract developers to its platform.
Sad to say, some bad things are ahead for RIM, including layoffs. It's not going to be pretty to watch, and it's hard not to get the feeling that RIM has passed a tipping point in terms of remaining competitive as a standalone mobile device manufacturer.
So what's going to happen in the long run? There was a time when a company like Cisco Systems might have been interested in RIM. But Cisco has decided its forays into the consumer market haven't worked, so we probably can dismiss that possibility.
This might sound crazy, but I wouldn't rule out Microsoft buying RIM. Here's why: I believe the Microsoft-Nokia partnership is destined for big problems, for both corporate culture and execution reasons. But since Nokia has much more at stake in the partnership (unfortunately for Stephen Elop) than Microsoft, for which the mobile market is but one line of business, Redmond conceivably could lose interest in the deal.
But with a market cap of $224 billion, Microsoft could easily absorb RIM. It would save on WP7 development costs, plus it already has a strong presence in the corporate market, where RIM has excelled (though that's also eroding). Maybe Microsoft could craft a two-tiered mobile strategy, selling higher-priced BlackBerrys along with cheaper WP7s.
Obviously it's not a perfect idea, but it's not a perfect world, especially for RIM these days. And unless something changes dramatically for the company, what we're witnessing looks an awful lot like a death spiral.