Research In Motion, the BlackBerry pioneer that lost its way, finally admitted last week that it’s in need of a major transformation. After falling way behind rivals Apple and Google in the smartphone industry, RIM must reinvent itself or else.
The possibilities for RIM range from a quick sale to a slow, successful rebuilding process. There isn’t a single, obvious outcome. And it doesn’t look good: Almost all signs point to RIM reducing its staff significantly.
Option 1: Drop It Like It’s Hot
One option is for RIM to sell itself right now for the highest amount it can get. While the BlackBerry phone platform isn’t competitive anymore, and the once-iconic brand isn’t worth much, there are parts of RIM that could be useful to someone.
For example: Its back-end service infrastructure and business. Its millions of subscribers around the world. Its patents. Its large corporate contracts to outfit companies with thousands of devices. Or its direct access to promising engineers in Waterloo, Ontario, graduating from Canada’s biggest engineering university.
The trouble with this scenario is finding a buyer willing to pay an acceptable amount of money for the company, knowing its assets are declining in value and the company is in disarray. Any acquirer would be forced to quickly reduce headcount, with the baggage that comes along with that.
Why buy RIM today for an amount you know will shrink as time goes on? When I first wrote in 2009 that Microsoft should buy RIM to jumpstart its mobile business, it would have probably cost $35 billion to get the deal done. Today, the market values RIM at less than $7 billion. Anyway, Microsoft – still the most logical acquirer – is busy with Nokia right now. That may or may not be the right long-term bet, but adding RIM to the mix just adds more chaos.
Other buyers could potentially include Facebook, Amazon, Google or even Apple. But none is likely to spend more than the bare minimum for whatever scraps it finds useful. That doesn’t give this scenario much hope. So I’m assigning a 20% probability to RIM selling itself within a year for $7 billion or more.
Option 2: Control-Alt-Delete
Rebooting RIM may be the best long-term strategy to keep the company independent. This concept has been successful for IBM, famously. But it’s a lot easier said than done.
The move that makes the most sense now is getting rid of RIM’s handset business and trying to make the BlackBerry platform something that corporations and governments can’t live without, regardless of their choice of devices. Selling handsets still represents the majority of RIM’s sales – 68% last quarter – but it’s a money loser.
Still, this means shedding a huge number of employees and betting on a software and services platform that might never catch on in the open market. (Pulling out of the handset business, then, would have to be a carefully calculated move.)
This means RIM will shrink in all metrics and may never become as big as the RIM of 2008. But that’s reality, and you can’t recreate the past.
This is a bold strategy, but RIM’s new CEO Thorsten Heins may finally be ballsy enough to do it. I’d say that there’s a 40% chance RIM will announce plans to widely open its platform within a year. (It’s already starting.) And there’s perhaps a 10% chance it’s wild enough to also announce plans to wind down the handset business. (This may not make sense right away, though it would be the strongest way to proclaim RIM’s new mission.)
Option 3: Slip and Slide
Another strategy – the one that RIM’s old bosses had been using for years – is to stick with the status quo, pretend everything is fine, and assume that whatever RIM will be able to ship next year will be better enough.
Under this model, RIM would likely continue to lose market value and financial viability, until it’s either sold in a fire sale or goes out of business.
Given RIM’s history, there’s perhaps a 30% chance that sticking with the old plan will also be the new plan. But it does sound like Heins actually knows he can’t do that.
Option 4: Miracle Comeback
One last possibility is that RIM will orchestrate one of the world’s greatest all-time comebacks. This is admittedly far-fetched and probably less than 1% likely. But it’s not completely impossible.
It would require creating a product or service that leapfrogs Apple, Google and the rest of the mobile industry, and becomes an immediate must-buy. Something so amazing that I’d drop my iPhone and run to the Verizon store to buy RIM’s new toy.
This sounds unlikely, especially given RIM’s track record. The iPhone was truly an unbelievable product when it launched, but Apple had that capability in its DNA. Even before Steve Jobs came back to rescue Apple, it was still shipping the best computers in the world. Apple just wasn’t moving in the right strategic direction or thinking about the future in the right way, and Jobs changed that.
It would be tough to argue that RIM has the right recipe of talent, leadership and vision to make this reality. But it’s not completely impossible. And it would make for a truly amazing story.
More likely: A modest push toward becoming primarily a mobile service provider and away from hardware sales. This is probably the safest and soundest bet.
Previously: The End of RIM As We Know It
