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RIM reports quarterly loss; other firms take note

  • 5000 more jobs lost on back of a bad quarter
  • BB OS10 delayed to next year
  • Potential acquisition target
Written by Adam Wajnberg
29/06/2012

Research in Motion (RIM), the makers of the Blackberry mobile phone and perennial 'Glass Joe' of the smartphone world, have released sobering 1st quarter results for 2012 that might convince shareholders to favour options for folding the company and selling the parts off. The results are not unexpected after numerous business announcements and layoffs over the last 6 months; but to see the actual wound and understand its ramifications will surely provide a wake up call to other ailing firms. If anything good comes out of the rapid decline of such an innovative company, it will be as a clarion call to the wider IT world on what not to do.

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                                      rim failure

Facts and Figs

First the facts and figures of today's earnings call:

- Total outlay $2.2bn

- Cash flow from operations $710mn

- Total revenue for Q1 $2.8bn; down from $4.9bn from last quarter

- 7.8mn handsets shipped, 260,000 Playbook tablets

- App market up to 89,000 apps

- 5000 job losses (from about 14,000 total) to allow $1bn in cost savings

- BBOS 10 release delayed from late 2012 to quarter way through 2013

That the financials are merely 'bad' is kinda the good news. When all costs are taken into account, including the little bits and pieces here and there, like their woeful 'Wake Up' campaign in Australia and their tumble in stock price, their total losses amount to about $500mn for the quarter. That's not good, but for a big company like RIM it's something that can be managed.

More worrying is that its only hope for relevancy - the good looking, if not revolutionary BlackBerry OS 10 platform - has been delayed. The release of this platform, along with new handsets to take advantage of it was the only real hope for RIM to even stay alive (and that was optimistic). Delaying it will be disastrous. If it had come out in September, it would be doing so against Windows Phone 8 and the iPhone 5, and midway between update cycles for Samsung's top-of-the-line Androids. It would be a tough market, but an energized one. If it comes out in March 2013, then new iPhone buyers will be snug in their 2 year contracts; Androiders will be halfway through their own, and Windows 8 buyers will be in a whole new world. March 2013 is completely useless.

That there are 89,000 apps available is encouraging, in light of Windows Phone only having slightly more of that - but most apps in development are relying on OS 10 to whip out the good stuff, so again...not good.

Who should be taking note

As discussed previously at length, RIM provides an almost classic narrative for how to die in the technology business. They leveraged their innovations into cozy contracts with businesses, IT departments and governments. They ignored the cries and grumbles of the end-users, who can be much swifter and frankly, much more punishing in their decision to move on. They relied on their position as the only provider of a real 'smartphone' experience to allow them to ignore the angry userbase. When Apple opened up the idea of a smartphone that was built to appeal to the usage patterns of the end-user, and not the needs of a business fleet, they scoffed. All that scoffing and ignoring has cost them their whole business. They've destroyed goodwill (and destroy it further with arrogant  marketing and nothing to back it up with) and in the process have fired enough people to freeze up their innovation pipeline. A better model for collapse could not have been written.

There are whole industries that could be taking note from this example. The financial sector has been catering to the desires of business for a long time, enaging in tactics to obfuscate and complicate transactions. As such, finance is now considered off limits to end users, and confidence in banks is at a low (not as low as it was just 3 years ago, but still low).

Energy companies ignore the public, who would like cheaper, cleaner and more efficient sources of energy than fossil fuels, and instead focus on the whims and needs of governments, instead of investing vigorously in new technologies.

But energy and finance can be excused for forgetting their reliance on customers; after all, they control essential elements of whole economies. It's in consumer technology, where innovation is white hot and competition is fierce, for a commodity that is only slightly less than absolutely necessary, that companies forget their place all the time.

Telstra

Telstra, for a long time, relied heavily on their partial monopoly of Australian communications. They also relied on their integral position within entrprise and government. They ignored customer despair and the overall market, comfortable in their 50% share. They've certainly turned that around under CEO David Thodey, but it could be argued this only happened because the share price took a beating. Now that their investments in mobile have paid off and their financial future is secure following the sale of their infrastructure, they're showing signs of the old Telstra. Make no mistake, Telstra is healthy and secure for the forseeable future. But at some point it will be a retailer like any other (albeit with vastly more money), and it will have to deal with a generation who grew up to consider them as a last option, rather than the swathes of 50-somethings right now who consider Telstra the default choice.

Sony

Sony is easily the starkest example worldwide of how to destroy an invincible brand, maybe even more so than RIM. For years the company was the final word in quality for home electronics; thanks to internal battles between engineers, marketers and designers, it's now a company that loses $6bn a year. Over this time they completely ignored the customer, who wanted items that worked well and played nicely. Sony's legal shenanigoats over expandable storage formats and blatant disrespect for customer needs and wants led them to miss out on digital content, tablets and e-readers- all thriving industries that Sony was best-placed to take advantage of.

Apple

Apple has everyone at arms-length right now. They're the only PC maker, tablet maker and phone maker that makes a high margin on every product sold. Their software products, including Mac software and enterprise software, are a small but still profitable part of their business. Their mobile content market is hugely profitable - 30% of every song, app, TV episode, movie, audiobook, e-book etc...makes its way to Apple. This company has no loss leaders (maybe Apple TV). Apple did all of this by obeying the ultimate customer demand in consumer technology - their stuff works.

Apple is, however, capable of arrogance. It ignores customers who want an enterprise tablet (powerful tablets with wider input options than just touchscreen). It ignores customers who want open platforms. It's ignoring the customer trend of wanting bigger screens on smartphones. It ignores the low-end market (it does try though - the iPad is actually well-priced compared to the direct competition for large tablets).

Apple looks invincible now, and even if it were to start flailing, it will take a long time to bring it down. But Microsoft looks set to make a dent with its Windows 8 Surface tablet. Samsung and Android are taking away market share in mobiles. Innovative firms like Vizio (which hasn't yet started shipping in Australia) are producing great looking, high spec TVs and computers. Apple can take a good look at RIM, the very company most directly affected by Apple's rise, and take away a good lesson; the customer may not always know what it wants, but they're not also always wrong.

 

 

 

 

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