An article by Dan Frommer on Business Insider prompted me to write this post. In its piece, Dan argues that RIM is the next Palm, pointing out similarities between the two companies. Palm used to sell tons of Treo devices just like RIM does today, but it failed eventually (and was acquired by HP). The big difference between the two is that in addition to devices, RIM is also focused on services and has been acquiring companies left and right to further strengthen its position. However, tough times are ahead of RIM…
I used to argue with our BlackBerry-lovin’ Simon on whether RIM has a future. As you can imagine, he defended his homeland company while I was fighting in the other direction. I have three points to share which go against RIM’s future prospects:
First, it’s important to note that RIM doesn’t own patents for GSM or CDMA communications and has to buy those licences for each product it ships. Major handset makers (Nokia, Samsung, Motorola, Sony Ericsson) do have those patents or at least take advantage of cross-licensing agreements; whereas some other companies like Apple and HTC don’t [own licences]. These two, however, are known for their high-end and mid-range devices (HTC) which bear higher margins (and higher profits).
Second, analysts (and myself) believe BlackBerry devices are slated for the mid-range of the market and that could disrupt RIM’s earning potential. We did hear some rumors about the BlackBerry tablet (which could be a higher-end product), but at the moment it’s unclear who would want such a device — though we still have to see it in action. Moreover, BlackBerry Torch isn’t selling like crazy…
And, third – increased competition, not only from the iPhone but from an array of Android handset makers.
So what should RIM do to save its ass? Switching to Android is one of the options, and that’s probably their best bet. On the other hand, they invested tons of cash in their own platform, so I doubt that will happen… at least not that fast.
RIM has done a great favor to the whole industry by revolutionizing the use of email on mobile phones, but does it have what it takes for the next step? Personally, I’m not that confident. what do you think?