Market Insight

RIM makes the bold decision to delay BlackBerry 10

June 28, 2012

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During Blackberry producer RIM's quarterly results the company announced it was delaying the launch of the next generation BlackBerry 10 smartphones from 2012 to the first quarter of 2013. RIM posted a net loss of $518m and revenue was down nearly 43 per cent year on year to $2.8bn. RIM shipped 7.8m Blackberry smartphones and 260,000 Playbook tablets in its financial quarter ending on the second of June. This represents a year on year decline of 41 per cent in Blackberry shipments. In an effort to reduce costs, RIM announced that it would be cutting 5,000 of its 16,500 strong workforce.

RIM is right to delay BlackBerry 10 if it's not ready as a mature and bug free product. A premature launch that fails would seal the future of RIM as a company purely managing the decline of legacy products. With a later launch, RIM still has a chance to turn around the company although the odds against success increase. The later BlackBerry 10 finally arrives, the more hostile will be the competitive landscape that RIM faces. This autumn RIM's rivals will launch: iOS6 and a new iPhone; Windows Phone 8; and a new generation of high-powered Android smartphones.

RIM's results indicate their market share is being decimated by competition in North America. Globally, RIM report their active subscriber base continues to rise from May's 78 million, but quarterly shipments are down dramatically, and RIM report that the growth in their subscriber base comes from outside North America. Many of those shipments are clearly going to new customers in emerging markets.

The challenge for RIM remains how to maintain its existing customer base in the run up to BlackBerry 10. And, how to manage the development costs of creating the new next generation BlackBerry 10 line up while also delivering support and incremental updates to the current BlackBerry 7 line.

BlackBerry Messenger (BBM) is a critical asset for retaining consumers. RIM reported 56 million users globally in May. As long as BBM remains exclusive to BlackBerry, RIM makes it difficult for those users to switch to Android or iPhone without either leaving their friends behind, carrying two phones, or persuading their friends to adopt an alternative messaging system such as WhatsApp.

Unlike Nokia's Symbian transition, RIM is still committed to support current BlackBerry 7 models and will continue to sell units for the foreseeable future. This should reassure existing enterprise customers for now. But sentiment and mindshare is turning even further against RIM. The news that RIM has delayed BlackBerry 10 will reach the mainstream press and trigger even more current BlackBerry-owning consumers and more importantly enterprise customers to investigate alternatives to BlackBerry. For many, Android, iOS and Windows Phone will be more than adequate. Microsoft's planned security and device management improvements in Windows Phone 8 will make the platform more suited to enterprise usage this autumn so further complicating RIM's defence of its current market share.

There is no good news in these results for RIM.

But if the choice RIM faced was between shipping a weak BlackBerry 10 product this year, or delaying to 2013 and launching a good next generation smartphone, then RIM has made absolutely the right decision. RIM has one chance to establish a future in the smartphone market. That chance is BlackBerry 10. RIM must launch a reliable and feature complete BlackBerry 10 to ensure long term survival as a smartphone maker.

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