January 23, 2013

Is RIM Making The Right Choice With BlackBerry 10?

On Monday reports circulated that Research in Motion (RIM), the maker of the BlackBerry smartphone and operating system, might license the technology and exit the hardware arena.

RIM CEO Thorsten Heins reportedly told German newspaper Die Weil that “the scale of hardware production as well as licensing our software” was a possibility. Heins also suggested that RIM could license the OS to allow other manufacturers to produce smartphones that run on the new BlackBerry 10 OS, and thus follow a business model closer to Google’s Android than its current model, which follows Apple’s model of producing the handsets and its proprietary OS.

And while it has been accepted that perhaps Heins comments were simply throwaway remarks taken out of context, opinion on what it could mean has varied.

“I can see great value in players that are looking to re-claim a foothold in the device space – those like HTC – through opening up a new potential market – business – to compliment their consumer offerings,” said Chris Silva, industry analyst at the Altimeter Group. “Prior to their launch of Windows devices, Nokia had a very strong offering of enterprise (E series) devices that were a large source of revenue for the company.”

“Adding in some business-centric offerings using RIM technology could bolster the much smaller part of the market they’re going after since taking on the Microsoft operating system,” Silva told redOrbit. “All of this said, I expect RIM to go it alone with their own devices in the initial launch, the company has always had a very strong belief in vertically integrated technology, to the point of having a whole lab set up to develop silicon and other components for the radio stack in the device. Their belief in the past was that reliability and security came from having a unified hardware and software vision.”

Of course any good CEO will likely cover his/her bases and have contingency plans in place. What is surprising in this regard is that Heins’ comments comes just a week and a half before BlackBerry 10 is to be rolled out. On the one hand this doesn’t exactly sound like there is absolute confidence in the new handset and its new OS.

Nor is this the first time the BlackBerry makers’ executives have discussed a change a path.

“RIM talked about getting into the OS licensing business at the Mobilecon show in October, although they seemed pretty intent on staying in the hardware business too at that point,” said telecommunications industry analyst Stephen A. Blum, president of Tellus Venture Assoicates.

Nor would the road ahead be easy if RIM were to go ahead with such a plan.

“They’ll have a hard time transitioning to a licensing model. RIM’s selling proposition is beginning-to-end enterprise/institutional IT network support,” Blum told redOrbit. “Consumers don’t buy BlackBerries, and that’s where the major manufacturers are focused.”

Instead it is possible that RIM could thus create a deal with one, or at most two, manufacturers to, in effect, buy out their hardware business and support the Blackberry OS as a niche.

“That’s playing the end game,” added Blum. “It’s not a growth strategy. If anything, manufacturers are looking at more open source OS (platforms). Samsung adopting Tizen, probably as a replacement for its in-house Bada OS, is an example.”

And what is going to further hurt RIM in the near future is that IT managers are a little more open than they were in the past. While RIM’s saving grace was always its security the IT world is embracing change.

“There’s an increasing amount of effort focused on the BYOD (bring your own device) market from manufacturers, carriers and, most importantly, application and service developers,” said Blum.

But he added that as long as there are IT departments that buy mobile services and hardware, and dictate corporate policy – government agencies, for example – RIM will sell devices and back end support.

“Their market share will continue to decline,” he further emphasized. “They just don’t have a compelling growth story to tell to manufacturers.”

And yet given all this it is likely that RIM probably won’t abandon the hardware market. But for now it is just waiting to see how BB10’s launch goes, and whether those who have long stuck by BlackBerry will continue to do so.

“Any significant departure from that, especially what is essentially a re-launch of the brand would be highly surprising,” said Silva.

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Peter Suciu is a freelance writer and has covered consumer electronics, technology, electronic entertainment and the fitness sports industry for more than 15 years. In that time his work has appeared in more than three dozen publications including Newsweek, PC Magazine and Wired. His work has also appeared on Forbes.com, Inc.com, Cnet.com, and Fortune.com. Peter is a regular writer for redOrbit.com.

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