Has Research In Motion?s BlackBerry Lost Its Edge?

Over the past decade, Research In Motion’s BlackBerry phone has become a cultural phenomenon. But can it stay one?

With a confusing mix of new products, poor developer support, lack of innovation and an unwillingness to take risks, RIM is in danger of being outsmarted and overshadowed by aggressive new rivals, such as HTC and Motorola.

RIM is a victim of its own success, says Michael Mace, principal at Rubicon Consulting, a strategy consulting firm for technology companies, struggling with problems around execution and distracted the pace at which the smartphone market is changing.

“Does RIM have a lot of problems? Yes, they do,” says Michael Mace, principal at Rubicon Consulting. “Can they fix it? Sure. But the question is do they want to?”

RIM did not respond to Wired.com’s request for comment.

Since RIM released the first BlackBerry smartphone in 2002, it has gathered about 56 percent share of the U.S smartphone market and sold more than 65 million phones, landing the company in Fortune magazine’s recent list of fastest growing firms.

But its future may not be as promising. Its market share among smartphones could shrink from a 20 percent overall market share today — which includes both smartphones and feature phones — to 12.8 percent at the end of 2012, says research firm Gartner. Google’s newly introduced Android operating system could move ahead of the BlackBerry and bag the No. 2 position, after Symbian.

Unless RIM acts fast, it may soon find itself facing treading the same path as Nokia. Despite its position as the largest handset maker and a huge presence in emerging markets, Nokia’s profits have eroded and its share in the smartphone market shrunk significantly.

So what’s ailing RIM?

Too many smartphones

Apple’s one-size-fits-all approach may be too spartan for most handset makers, who like to give consumers a choice of different devices. But RIM may have gone a little too far in its approach. Any at time, RIM offers more than 20 handsets, most of which are minor variations of each other. Take the Storm and its updated version Storm 2. The two are near identical in terms of features. The difference? Storm 2 offers Wi-Fi capability, a feature missing in its predecessor. Now try spotting the difference between the BlackBerry Curve 8900 and the Tour. Again, almost similar features except for that fact that Curve has Wi-Fi capability and the Tour doesn’t. The Curve 8900 is a GSM phone, while the Tour is a CDMA version.

Having too many handsets, with each named differently, confuses consumers, says Mace.

“RIM is doing all these different configurations because it is what the operators want,” he says. “But it is better to give up some growth than become a mediocre product in your current market, which is what they are in danger of right now.”

It will be bitter medicine for RIM. With its $34 billion market capitalization, RIM can’t afford to offend Wall Street. But Mace says the company needs to step back and streamline its product portfolio.

Not knowing which handsets to focus on also takes a toll on BlackBerry developers. It drives up development costs for programmers who want to create software for the device. Developers have to test their programs for multiple handsets and that is difficult and expensive, says Peter Sisson, founder and CEO of Toktumi, a company that created the Line2 app for the iPhone. Sisson is a seasoned entrepreneur who sold his last startup, Teleo, to Microsoft.

“Once we got into it developing for the BlackBerry, I realized, ‘Oh my God, this is an absolute nightmare.’ There are all these phones out there and the hardware is not abstracted,” he says. “By the time you get your app out of QA and into production, a new model comes along that is not quite compatible with the others, requiring further coding changes or even a whole new build.”

Innovation in handsets

When RIM first introduced the BlackBerry, the device’s push e-mail capability set it apart from its peers and created a legion of BlackBerry addicts.

But now a smartphone is no longer a device that just makes calls and checks e-mail. The rise of social networking tools such as Facebook and Twitter means users want a device that can help them stay connected beyond e-mail. Sophisticated consumers also want integrated contact management that can pull in contacts from different buckets. Add to that list a good web browser that lets them surf on the go and maps that can offer accurate turn-by-turn directions. Almost all these features have increasingly become de rigueur in smartphones. Except in the BlackBerry.

The BlackBerry has gained notoriety for having a browser that seems stuck in the last decade. RIM is reportedly working to fix that. In September, the company bought Torch Mobile, which makes�the Webkit-based Iris browser. Webkit is the layout engine that is also used by the iPhone, Android and Symbian mobile operating systems.

While rivals such as Motorola and HTC are experimenting with new interfaces for their devices, RIM has stuck to a formula that works for now — but makes its devices look boring.

If the Storm, RIM’s first touchscreen phone, is any indicator, creating a radically new product isn’t easy for RIM. The Storm was BlackBerry’s first attempt to create a device that wasn’t a variation of its earlier handsets. The Storm was widely panned by reviewers, although it sold more than a million units in just two months of its launch.

“They shipped a product that wasn’t completely tested and debugged,” says Mace. “It is something that the old RIM wouldn’t have done. The first Storm is the sign that they lost control over their handset development process.”

Despite some recent mis-steps, discounting the BlackBerry is a mistake, says Dulaney. “The Bold and Curve are very well-done designs for those who like a keyboard,” he says. “And for business users they tend to work very well since they want to use their devices in portrait rather than landscape mode.”

Support for developers

Meanwhile, Apple’s success with its App store forced every handset manufacturer to attach an app store with their device. RIM is no exception. In April it introduced the BlackBerry App world.

But the BlackBerry platform was never created with the intention of allowing a swarm of independent developers to write software for it.

“RIM needs to clean up the platform and make sure the technology is more flexible,” says Mace. “These are things that take time and do not yield revenue immediately. You have to take a bunch of engineers and clean up all the garbage in the background.”

The complexities of the platform also mean that fewer developers know how to code for the BlackBerry, says Sisson. A few weeks ago, Sisson posted an ad on Craigslist looking for developers for the iPhone and the BlackBerry platforms.

Within hours, he says, he received more than 100 resumes from iPhone developers, while just a few responded to the BlackBerry posting. “There’s a shortage of talented developers who are both interested and capable of writing code for Blackberry apps,” says Sisson. “This spells major trouble for the future of the BlackBerry.”

A quick look at the BlackBerry App world bears this out. The App World store has just about 2,000 apps available for download, compared to the iPhone App Store’s 90,000 apps or Android’s 12,000.

Sisson suggests RIM come up with a new device that can take on the Droid, iPhone, the Palm Pre and the host of new smartphones cropping up. It could be a device targeted at consumers, that would integrate with the company’s app store and put the BlackBerry on equal footing with its rivals.

“They will still have their existing loyal customer base that wants e-mail and the typical BlackBerry experience,” says Sisson. “But they can also cut free from the older models and create a frictionless experience for consumers and developers.”

RIM is trying to solve some of these problems. The company recently restructured its Alliance program, its resource for independent developers to offer better access to support and a faster cycle to get application developers up and running.

But that is not enough, says Sisson. “Unless RIM makes major changes to its platform — standardizing the hardware and OS, offering a QA test lab for engineers and streamlining the Alliance program still further — the BlackBerry will never have the quantity and quality of Apps that iPhone or Android phones will have.”

Telecom carrier challenges

A major catalyst in RIM’s growth and success is the company’s ability to work with a wide range of telecom carriers. But the cozy relationship with carriers also means that the company may be kowtowing to wireless service providers a little too much.

Even though Wi-Fi has become a must-have feature for most smartphones, some reports suggest BlackBerry reportedly left it out of the Storm at Verizon’s insistence. RIM’s relationship with Storm paid off. Despite extremely tepid reviews and user complaints about the difficult touchscreen and buggy software, Verizon’s position as the biggest U.S. carrier helped sell more than 1 million units of the Storm in just two months of the device’s launch.

Meanwhile, AT&T’s exclusive partnership with iPhone changed the dynamics for RIM in the United States. Three years ago, AT&T and Verizon Wireless represented about 20 percent each of RIM’s sales, estimates an analyst at Sanford C. Bernstein. Today AT&T is down to 15 percent of RIM’s sales, while Verizon is up to 28 percent.

But the dependence on Verizon is now starting to backfire. Last month, RIM introduced an updated version of its touchscreen phone the Storm 2. The phone is expected to be exclusively available on Verizon. But Verizon is putting its marketing muscle behind Motorola’s newly released Droid phone. Droid has gathered much better reviews than the Storm 2 and is being backed by an aggressive advertising campaign from Verizon. Together that could eat into Storm 2’s sales, says Ken Dulaney, vice-president of mobile computing with Gartner.

“You will have to watch Verizon’s result in the next quarter for signs of weakness at RIM,” he says. “The Droid will compete against the Storm and the Curve. If we see degradation of sales for RIM, then we can say RIM is under attack in the soft underbelly segments that they have.”

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