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?"

Comments

No

[ghn]

Look at apple's profits.

And please stop the sensationalist question mark titles.

Re:No

[Anonymous Coward]

See http://en.wikipedia.org/wiki/Betteridge%27s_Law_of_Headlines and you will understand the reason for the question mark.

Re:No

[Anonymous Coward]

We only have a handful of large players in the handset industry right now.

If it's like the PC industry, we'll get exactly what we want for dirt cheap from any one of a 1,000 different manufacturers operating on razor-thin margins.

That'd be nice, and I'd like to see Google take their Motorola Mobility purchase and kick off that trend right now.

Re:No

[gl4ss]

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.

Re:No

[wisty]

Also, RIM's loss was mostly from writing down old stock. It's a paper loss, making up for paper profits which never really happened.

Their position isn't good, but it's not as horrible as the half billion loss indicates.

Re:No

[hairyfeet]

Actually the reason RIM is gonna end up toast is the same reason we have seen tons of other companies go from being the big cheese to just another small fry, hell its the same reason we are seeing MSFT throw the Hail Mary of the century with Win 8 in Oct, and that is they didn't see the disruptive shift in the market coming and instead of innovating they sat on their laurels.

There is no reason that Blackberry couldn't have branched out, they could have had sleek elite lines like Apple and entry lines like Android, but like many corps they got fat and sat on their asses and the world passed them by. Seriously how many times have we seen this play out? RIM, Palm, the above mentioned MSFT, Nokia, these corps become the king of their respective hills and instead of staying hungry and growing they plop down and just count the money...right up to the point the Mac truck that is the changing tech scene runs their asses smooth over.

if you want to sit on your ass? tech is NOT the market you want to be in. just look at how much things have changed in the last decade, the end of the MHZ wars and the rise of multicores in the PC market, the death of the dumbphone for smartphones, netbooks and tablets appearing out of thin air, if you try to set on your ass in the tech world somebody will come along and kick you right in the ass, simple as that. RIM had a sweet thing going with business users but instead of doing the smart thing which would have been branching out into new markets, developing new exciting designs, and trying to stay ahead of the curve, they basically pulled a Palm and just rehashed what they had. Bad move RIM and now it looks like you're toast.

Re:No

[Sponge Bath]

seeing MSFT throw the Hail Mary... they sat on their laurels.

For some strange reason, there were no chairs left.

Obvious?

[SultanCemil]

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....

Re:Obvious?

[Anonymous Coward]

You don't disrupt a market by being a follower. Being a follower is always a volume business, you are just there to run a numbers game.

In apple's case they re-wrote the rulebook and turned the first question abotu every product into "But is it better than apple's offering". Once a single player is in that position t becomes very hard to unseat them by simply copying. You need to change the rules again to win that game.

Re:Obvious?

[Anonymous Coward]

Nokia will be an even greater case study.

Re:Obvious?

[quadrox]

Yeah what really gets me is that they had a headstart with their maemo tablets long before the iphone came out. These were "only" lacking the phone component, but were arguable intended to fill the same "niche" as the iphone, and yet they never really put any effort into making them really good. They could have been where apple is now, but instead we get more Microsoft crap. Way to go Nokia.

Re:Obvious?

[jimicus]

I think RIM's lead worked against them - it made them complacent. By the time they realised they couldn't afford to be complacent, the rest of the world had noticed it some years earlier.

Let's look at a rough timeline:

  - RIM release the first Blackberry along with BES.
  - Microsoft think "What a good idea". They integrate some of the more basic features of BES into Exchange under the name of ActiveSync, and improve it considerably as the years go by. Why does Microsoft do this? Simple, it's a popular feature and they can use it to persuade companies to upgrade their existing Exchange infrastructure rather than buy BES. All they need to do is find some handset vendors to license the client-side to.
  - RIM doubtless looks into this, concludes that ActiveSync is nothing like as sophisticated as BES (it isn't), and that nobody else has released a handset that does a half-decent job of managing email anyway (they haven't).
  - Apple release the iPhone. It's a swishy piece of kit - far prettier than anything RIM have ever produced, and much more pleasant to use - but ultimately not terribly sophisticated. RIM ignore it.
  - Microsoft release Exchange 2007. ActiveSync is greatly improved. RIM ignore it.
  - HTC release the HTC Dream - one of the first Android handsets. Android's prettier than Blackberry, and a sight easier to use. But RIM ignore it.
  - Apple license ActiveSync and include support in an update to the iPhone OS. RIM ignore it.
  - Google license ActiveSync and include support in Android. Phones that support Android 2.0 or later get Exchange support.
  - RIM buy QNX with a view to rewriting their OS. Corporate acquisitions typically involve months of due diligence before they're announced to the public; it's safe to assume that RIM were looking into this some time before Android 2.0 was released.

So where does this leave RIM? It's Q2 2010, they've obviously decided that long-term, they want a new base for their smartphone OS. At this point they're probably at least three years behind Apple and two years behind Android. Pretty much all they can do is maintain their existing product line while putting together what will be their next major OS upgrade and hope to hell they can keep their heads above water for as long as it takes to get something released. Will they? It's looking doubtful.

Re:Obvious?

[Dynamoo]

RIM must be smarting because it *was* a market disrupter.. it's just that the market continued to evolve. Their problem now is.. how to disrupt the market again? I honestly don't think they can do it without radical and painful surgery to their business model.

My two cents worth.. RIM should dump plans for BB10. The world doesn't want another mobile OS, regardless of how good it might be from a technical POV. RIM should slot itself in with Android or perhaps Windows, but then differentiate itself with its software and services offerings (e.g. BBM, BES etc). If you offered me a truly enterprise-capable Android phone I would rip it out of your hands! Sure, margins will be thinner and the glory days will be behind them.. but they would probably survive, and that gives them time to look at the next way of disrupting the market.

Re:Obvious?

[Relayman]

Apple is in the computer business, not the phone business. I use my iPhone as a phone less than 10% of the time. The rest of the time, I use it as a computer. These companies need to realize that they shouldn't be selling phones, they should be selling computers.

Just because you build it doesn't mean they'll ...

[Gr8Apes]

No, it's not the end of the handset industry, nor are they in trouble. It's an industry that 80+% of the users toss their perfectly good handset every 18-24 months because their contracts generally make it worthwhile to do so. Just try to get a decent contract with a reasonable monthly fee that's lower than getting the same contract with a brand new shiny phone attached. However, just because you make a handset doesn't mean people will buy it, especially if that handset comes at virtually the same price or within easy disposable income range of the top of the line handsets. Why would you buy a Yugo if for $10 more you can own a Lexus?

No, just the mediocre handset industry.

[UpnAtom]

Just bring out a decent product. Nokia's N9 with zero marketing, blocked in all major markets and Nokia's own CEO briefing against it still managed to sell millions of units.

Because it's a superb smartphone with a superb OS.

RIM will bounce back if BB10 is as good as it's supposed to be, on decent hardware, in multiple form-factors.

RIM not industry

[Lev13than]

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.

Re:RIM not industry

[erice]

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.

OSX might have saved Apple from extinction, but it wasn't enough to make them thrive. The Ipod did that.

Qnx might save some residue of RIM but if they want to thrive again, they will need a fresh beachhead in a new market.

Re:RIM not industry

[bill_mcgonigle]

there is little shared memory for the bloated, buggy mess that was Mac OS 6-9.

bloated? Until recently I had a G3 that would boot both. OS9 started in about 10 seconds - OSX took about 2 minutes. OS9 was comfortable inside 16MB. OSX preferred about a quarter gig on that system. Everything about the UI was much faster on OS9.

Rail against its non-modern architecture all you want, but it doesn't make sense to call it 'bloated'.

Re:RIM not industry

[antifoidulus]

Wasn't that bad? From 'kipedia:

New applications, those written with Copland in mind, would be able to directly communicate with the system servers and thereby gain many advantages in terms of performance and scalability. They could also communicate with the kernel to âoespin offâ separate applications or threads, which would run as separate processes in protected memory, as in most modern operating systems. However, these separate applications could not use non-re-entrant calls like QuickDraw, and thus could have no user interface. Apple suggested that larger programs could place their user interface in a normal Macintosh application, which would then start "worker threads" externally.[13]

How is that "not that bad"? Not to mention that devs complained that it crashed constantly, had no symmetric multiprocessing support etc. etc. It MAY have developed into something useful, but Apple was bleeding cash so badly at that point there was no way they could have survived until it did(sort of like RIM). NeXT by comparison was far, FAR more mature and stable. Apple was able to adapt NeXT OS to meet their needs much faster than they ever could have with Copland, and it had a much better architecture to boot. Some people seem to have a reality distortion field about Jobs's reality distortion field.....

Re:RIM not industry

[am 2k]

The original iPod didn't run iOS, they licensed a third party OS and added their own UI on top of it.

No competition

[Anonymous Coward]

Who can make a phone with all the patent traps?

Microsoft Deserve credit too

[Freaky Spook]

In apple's case they re-wrote the rulebook and turned the first question abotu every product into "But is it better than apple's offering"

Microsoft expanding their ActiveSync license program as well I would contribute to helping the iPhone succeed. Suddenly you didn't need to invest in expensive BES licensing costs, windows licensing and hardware costs just to connect a phone to a mailbox. When that happened I wondered just exactly how Blackberry would react to the market, and well they didn't.

Re:Who cares?

[fferreres]

Given that smartphones are the most widelydeployed and used general purpose computers in hands of individuals, I guess they do care. It's the future of computing.

They were in the market of cheap buffet style email for corp users and managed to get there by being convincing carriers to not price by kb with their platform.

The best chance of survival for them is to buy a T-mobile or Sprint (with the iPhone deal RIM is screwed now) and offer corp. plans for $30 a month, and then building an enterprise app ecosystem around a solid platform as QNX. No sane company will pay $100 per employee/mo if they could pay $30 and have a platform that can run apps just as good as the alternatives.

They though they where a premium brand with a premium product and now even if the products excel, they are irrelevant. If given a choice, most will prefer widely used platforms w/hundreds thousand apps and solid development tools.

Buying a carrier and being the low cost provider for corps is one of the few things that could save them - but may be too late.

what it signals...

[khipu]

is that RIM made lousy management decisions, has a bad product, and is now paying the price for that. That's a good thing.

So...

[SmallFurryCreature]

HP/Compaq, Lenovo, Acer, Asus, Dell, Samsung, Sony, Fujitsu... who among these would you call small players? A small player in my mind is a store chain that sells rebranded or white label computers, not an asian mega giant.

Just because YOU don't shop around, doesn't mean nobody else does.

Re:So...

[Karlt1]

HP/Compaq - their PC division makes so little money they thought about getting rid of it.

Lenovo - usually loses money every now and thn thy make a slight profit.

Acer - hasn't done well since the netbook craze.

Dell - Is seeing revenue and profit decline and trying to move away from PCs to services.

Sony - reported billion dollar losses.

Does that seem like a healthy industry?

Re:So...

[alfredo]

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.

Re:Eheh

[DerPflanz]

This is a weird argument. I had a N900, with all the advantages you describe here: Linux, real software, free. However, since I have a Galaxy Nexus with Android, I have the feeling the overall quality of apps is *way* better. And guess what, many of the good ones are free (as in beer) too. When choosing between paying some money for an app that does do what I want, compared to a app 'from a developer with a heart of his app' that looks ugly and stays in beta forever, I'd pay.

Besides, developing for Android is a lot nicer than for the N900. I don't know how far MeeGo/Moblin/Maemo has become in the last year, but I really like Android from both a user's and developer's perspective.

Re:Not surprising

[Tridus]

BB10 happens to be missing a feature - nobody can buy it. Sadly, "it shipped" is a critical feature. It doesn't matter how amazing it is without that one feature.

Meanwhile, Android is a crowded market that has lots of demand. People actually buy Android phones. This is the same mistake Nokia made: thinking that being the big fish in a swimming pool is better then being a small fish in the ocean.

Fanboys love to insult Android as second rate, but their "amazing" vendors would trade places with Samsung in a heartbeat because they (and Android) happen to do really well on the metric that matters in the business world: people actually buy it.