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Does RIM's "Huge Loss" Signal Wider Handset Market Deterioration?
zacharye writes "RIM was expected to deliver a nightmarish, -30% year-on-year revenue decline into the May quarter — the company issued its latest profit warning just four weeks ago. Yet it ended up missing the lowered consensus estimate by 10%, generating just $2.8 billion in sales. The reasons for RIM's decline are well-known and will be rehashed again over the next 24 hours. But the size of the F1Q13 sales miss raises another question: apart from Apple and Samsung, is the handset industry drifting into serious trouble?"
I'll venture a guess that in 10 years, RIM's fall from grace will probably be a great case study in business schools around the world.
How a successful company managed, through horrible fore-sight, atrocious product management and lousy business management, to squander an insurmountable lead in the enterprise market is amazing.
On to the story at hand: there is no doubt that the wider handset market is in all kinds of trouble. Apple clearly makes most of the profit, and Samsung picks off what is left. What does this leave the other players? Nothing. Clearly there is no competition in the iOS market, and Samsung has a huge lead (and massive fab capabilities). Unless one of the other players steps up and makes a handset that, you know, you'd actually want, then they're dead.
End of story - this isn't that complex. Make a product people want. The competition has showed you the way....
Cemil.
This is a RIM problem, not an industry problem. RIM's sales are way down because their technology is outdated and they can't get their shit together. If it were an industry problem we'd be seeing reduced volumes and purchase prices across the board. By that measure Huawei's success is a more accurate harbinger of what's to come.
Can't help but think that RIM's current situation is a lot like what Apple faced with Copland back in the mid-90s. After several years of trying to build their own next-gen system they gave up and purchased NeXT, which we now know as OS X. After numerous OS delays and corporate near-death experiences they finally launched OS X Public Beta in 2000. Given that 90% of current Mac users never touched Classic, there is little shared memory for the bloated, buggy mess that was Mac OS 6-9.
RIM was in the same place two years ago, with a nasty software stack and no ecosystem. They responded by buying QNX. Even with the latest delays they are still going to from purchase to market faster than Apple did with OS X. Same fundamental problem, same solution, dramatically different outcomes.
When you have nothing left to burn you must set yourself on fire
See http://en.wikipedia.org/wiki/Betteridge%27s_Law_of_Headlines and you will understand the reason for the question mark.
The handset industry is facing the same problem as the PC industry did during the 80's and we will end up with 2 or 3 large players.
oh you mean just like happened to handset industry in 1996? and again in 2000? and again in 2004? and 2008?
hint: handset industry is in perpetual trouble, always been, always will. the bigger players manage with their momentum over the bad times, like motorola & samsung have done(even moto ended up getting chopped up, since last time they had a hit was with the original razrs) and how nokia is doing now after almost a decade of good times. it remains to be seen if blackberry is too big to fail or not in this regard.
the difference to pc industry is obvious though, you can't as easily just buy the parts and throw them together - another difference is IP rights, which basically bar any new entrees to the market(only small niche players are tolerated without getting sued by the big 5) even though anyone can buy the devices from the subcontracting factories.
and rims huge loss just signals rims situation - they hit their market peak. their actual problem was that they were never a global player and another problem is that they kept just hiring more and more people during their good times - that's another thing these companies do, they hoard engineers on the good times even if they don't have anything worhwhile for them to do - so expenses balloon when their profits balloon and then if they have a period of not having a hit phone in the stores it's doomsday instantly.
also - bb only ever had a lead in very few countries. they were never a truly global contender - however they did have growth until now.
world was created 5 seconds before this post as it is.
First, RIM is in this pickle because they got complacent when they were dominating the mobile market with one of the most popular devices on the market. Instead of innovating all they did was tweak their designs a little and create designer models of the same thing. The story of RIM is often repeated where a market leader is suddenly playing catch-up when a distruptor enters the market with something dramatically different. RIM is a story of how everything is being done wrong by a mobile device company, even the announcement of a delayed BB10 devices is hurting the company because the remaining Blackberry fan boys are not going to buy a BB today that is going to be replaced tomorrow.
Secondly, the market will not tolerate ONE maker of all their mobile devices. Apple will not become the ONLY player in the mobile device market, where everyone owns an iPhone or iPad or iSomething. Clearly it is obviously that as popular as iThings are, Android devices are growing quickly and outnumbering iOS devices. Sure, maybe Android devices are not as good or flashy or refined, but there are significantly more people out there unwilling to pay the Apple tax for a product. In any market there are fanboys and the fanboys are NEVER going to agree on ONE thing, that is an absolute guarantee.
The question is then how many players in the mobile market will consumers tolerate? So far it looks like its only 2. RIM lost their market position through complacency and Microsoft is trying to claw their way in, but it seems consumers are only interested in having 2 options, iOS or Android devices.
I think RIM is done, period. Any speculation for the company to rebound belies a repetitive habit for failure that began when the iPhone and Android devices were released. RIM would have to shift modus operandi dramatically before it could even be considered a competitor, and I don't think they have it in them. What RIM should do now is try to position themselves as an attractive company to buy, I am sure the patent portfolio for RIM is a goldmine for Apple, Google, or Microsoft and would significantly boost any company looking to compete in the mobile market. But ultimately RIM technology needs to be directed by an innovator and there is nobody at RIM that can claim that position.
I haven't thought of anything clever to put here, but then again most of you haven't either.
All of the above used the same OS, and all were competing on price. Sony did try to distinguish themselves in the design department, but they couldn't match the Apple design team. HP made some handsome machines, but once booted, they looked like everyone else. They were all Microsoft's bitch, and though it gave an advantage in some markets, they had no control of the quality of the OS. In the end, they were boring in design and use. Their products were associated with work. Booting up your home computer shouldn't remind you of the crushing boredom of your beige box in your cubicle.
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I understand the need to weave a narrative where the winners all deserved their success and the losers all deserved their failures, but reality is rather more nuanced. (The need for winners to be good guys and losers to be lazy seems a strongly American phenomenon.)
(1) Almost all major tech companies *do* try lots of different products outside of their core competencies. Almost all fail. As long as you don't notice Microsoft's hundreds of failed innovative product attempts, it's easy to claim their sitting on their backside. Also remember that outside of one's area of specialization, the odds of success are pretty much the same as anyone's: 1 in 1,000.
(2) RIM was busy serving their customers, and more to the point, probably serve their customers better than any competitor. They're having their lunch eaten because their market is ceasing to exist, being replaced by inferior (for their market's very particular uses) technology. Being able to play Angry Birds is NOT an improvement to businesses or governments productivity. Unfortunately for RIM, it turns out company productivity is not the final metric for phone selection...
The point is that while the tech winners inevitably are very hard working, most of the losers are as well, but failed to have the butterfly on the other side of the globe flap their wings the right way. It's amazing how these narratives are always clear only with hindsight.
Company A wasted their money and reputation n projects outside their core competencies and deserved to fail! Company A failed to anticipate the changing markets and deserved to fail!
Very, very few companies ever get more than one big success, and that's one more success than you or I have ever had. No need to disrespect them because they failed to get a second. (Or in MS's case, a fourth (DOS, Windows, Office)).