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Can BlackBerry Maker Battle with Giants Apple And Google In The Smartphone Wars?

What's wrong with Research In Motion? That could be the question after financial analysts downgraded the BlackBerry maker's stock and reviewers panned its entry into the tablet space.

Indeed, four years ago, Canada's own success story could do no wrong. Celebrities and future U.S. presidents were touting its addictive 'CrackBerry' email devices, while RIM itself was wrestling with Royal Bank for the title of most valuable company in Canada.

But ever since Apple entered the smartphone market with the iPhone in 2007, followed shortly thereafter by Google with Android devices, the one-time darling of the Canadian technology industry has been looking increasingly bewildered. RIM has lost market share to its rivals and is now third in the smartphone game, with not much better prospects in tablets.

The past month, which saw negative reviews for the BlackBerry PlayBook tablet and lacklustre quarterly results, has been particularly stormy, resulting in some market analysts calling for a management change. A class-action lawsuit against the firm announced Friday doesn't help.

So, what is wrong with the Waterloo, Ont.-based company, and can it be fixed? Can it be sexier than Apple? Can it outmuscle heavyweights like Google? Can it go on the hunt, or will it be the next takeover target for a tech giant. Can Canada's darling survive the rush to the mobile space. These are vital questions -- particularly for Canada, where the overall technology industry revolves largely around RIM.

Ironically, company watchers say there isn't really anything wrong per se, since RIM has solid financials. The company continues to post increases in BlackBerry sales each quarter, boasts healthy profit and operating margins, has several billions of dollars of cash on hand and no debt. It also enjoys strong brand recognition with plenty of loyal customers.

"In any other industry, their numbers would be seen as a great success story," said Sarah Rotman Epps, senior analyst of consumer product strategy for Forrester Research. "Except that the smartphone market overall is spiking and RIM is not claiming its equal share of that growth. There's the rub."

Analyst estimates differ but generally find Android phones are making up around half of current smartphone sales globally, with Apple coming in second at about 25 per cent. RIM is in third with a share of approximately 15 per cent.

Most industry watchers agree that RIM has had trouble transitioning from a company that caters to big businesses to one that can capture the zeitgeist of the much larger consumer market.

The PlayBook, for example, is a product marred by problems, said Ken Dulaney, vice-president and analyst at Gartner Research. The tablet was initially announced as a competitor to Apple's iPad last September but, when it was released last month, it was bare bones. The hardware and software were lauded but fundamentals such as e-mail and calendar features were missing. The result was an overdue product that looked, paradoxically, like it was rushed out the door.

"It just took too long. It gave their competition a lot of head room," Dulaney said. "There have been some other rushes to market, but they weren't as big a risk as RIM took. Samsung may have rushed the Galaxy Tab, but Samsung is a monstrous company that can afford to make those kinds of mistakes."

Going slow may have worked in the days when competition was thin, but RIM now needs to develop software and get it out the door faster, he said The company also needs to rework the user interface of its devices to make them work better with the touch screen movement Apple helped popularize.

RIM is at least aware of that issue, Dulaney said, as evidenced by its acquisition late last year of The Astonishing Tribe, a well-regarded design firm in Sweden.

"That organization has to be given free reign to redesign the user interface. If they can match it up with Apple then they'll get the [app] developers they need," he said.


The app situation is one where RIM's position borders on dire. While Apple and Google boast hundreds of thousands of apps for their smartphones, RIM's App World is estimated to have fewer than 20,000. Moreover, the company's offerings are missing some key ingredients - the PlayBook, for example, launched without Facebook or Twitter apps.

Software developers have criticized the company's registration process as too complex and expensive, which partially explains the dearth of apps. The company needs to take a page from Apple and figure out how to smooth those relationships, said IDC's senior mobility analyst Kevin Restivo.

"Apple has understood better than anyone that the smartphone is a development platform," he said. "People want to do things with their smartphone."

Image is also a problem, Forrester's Rotman Epps said. It may be a Canadian thing, but RIM executives seem unwilling to direct the market and media the way competitors do. A typical Apple product launch involves a blustery speech from chief executive Steve Jobs that spells out how the company sees its product.

The PlayBook's recent launch in New York, meanwhile, was a subdued cocktail party. Both co-CEOs Mike Laziridis and Jim Balsillie were there, but neither gave a speech.

"RIM doesn't conduct itself with the same level of confidence as Apple does, although it'd be hard for any company to do that, really," Rotman Epps said. "They're not telling the market what to think of them, but maybe they should. I don't know if one way is better or not but it certainly has an impact."

On a grander scale, RIM is also facing an uphill struggle against the Silicon Valley titans. While RIM has a market capitalization of around $22-billion, it pales in size to Google's $167-billion and Apple's $307-billion.

Laura DiDio, principal analyst at Information Technology Intelligence Consulting, likens RIM to the Finnish army during the Second World War. The Finns were able to hold off the invading Soviet soldiers for a while because they fielded highly skilled sharpshooters on skis.

"[Eventually] they were overwhelmed by sheer numbers," she said. "RIM has to continue to be more agile and flexible and hope the other guys make a giant misstep or that somebody like Google gets distracted because they're doing so much."

There is also the looming spectre of Microsoft, which on Tuesday announced an upcoming update to its Windows Phone line. While the software giant has also struggled against Apple and Google, it has piles of cash and a burning desire to succeed in smartphones. To that end, Microsoft in February announced a deal with Nokia, the world's biggest cellphone maker - which has also had similar problems - that will see the Finnish company use only Windows on its smartphones.

That's going to make it even harder for RIM, said California-based technology analyst Rob Enderle.

"These are companies that measure their cash reserves in double-digit billions of dollars. RIM doesn't have that kind of scale. Currently they're overmatched," he said. "Not only are they not a consumer-oriented company, they don't have the resources to go to war with these other players."

RIM is going to have to get bigger quickly by acquiring other companies, or get swallowed up itself, he said.

"Doing neither is killing them."

On the other hand, said IDC's Restivo, RIM could return to its prosperous ways simply by focusing on the traits that made it successful in the first place: quality and innovation.

"If you believe that all of the world is going to have a smartphone at some point, then there's a ton of growth to be had, not just for RIM but for all players," he said. "Too often people think this is a zero-sum game where one player has to lose and one has to win. Certainly for the short and medium term that's not going to happen."

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