This article was originally published in Maclean's Magazine on October 15, 2012
It's just before 10 a.m. and Andrew McLeod, the Canadian managing director for Research in Motion Ltd., is sitting in a diner in downtown Toronto. For the first time in recent memory, he has some "good" news to talk about. A day earlier, the beleaguered BlackBerry-maker reported a quarterly loss of $235 million--less than many had feared. It also added about two million new subscribers, mostly in developing countries. RIM's battered shares, which have traded as low as $6.22 in recent weeks, shot up 13 per cent.
While none of that means RIM is back from the brink--far from it, in fact--it does suggest the Waterloo, Ont.-based company may still be around in early 2013 to launch its long-overdue BlackBerry 10 smartphone, which seemed far from certain just a few weeks earlier. "We're entering lab testing with our carrier partners next month," says McLeod. "Then we'll be gearing up for a series of really big commercial platform launches. It's a really exciting time for us."
BlackBerry fans, a dwindling crowd, seem cautiously optimistic. Developers at a recent conference reacted positively to demo phones running BlackBerry 10, despite first being treated to a bizarre music video featuring Alec Saunders, RIM's head of developer relations, singing a nerdy, BlackBerry-themed version of REO Speedwagon's Keep on Loving You. Unlike Apple's iPhone, or devices running Google's Android software, BlackBerry 10 allows users to slide back-and-forth between applications (without the need for a "home" button) and check their inboxes by swiping away the screen they're viewing. "It fundamentally changes the paradigm of how a smartphone should be used," says independent tech analyst Carmi Levy. "The problem for RIM isn't developing unique technology. It's convincing people to at least give it a try."
To that end, RIM has also added several consumer-oriented features, including a new take on predictive typing and a camera that "rewinds" photos to capture missed expression (by taking a series of shots before the user clicks the button). RIM has also caught a break from its bigger rivals, which have recently begun to look less invincible. The iPhone 5 failed to raise the bar for the industry and its launch was marred by Apple's buggy Maps application, forcing a rare apology. Meanwhile, Samsung, now the world's largest device maker, just lost a US$1-billion patent-infringement case to Apple, and Microsoft's much talked about Windows Phone 8 has yet to catch on with consumers.
It all amounts to a narrow window of opportunity for RIM to regain its footing, although doing so will require near-flawless execution, brilliant marketing and a significant amount of luck--all of which have been in very short supply in recent years.
RIM's market share has tumbled to just 4.8 per cent in recent months, according to research firm International Data Corp. Manufacturers who run Android, such as Samsung, Motorola and HTC, now control 68 per cent of the market while the iPhone boasts 17 per cent. "Unfortunately, there's a loss of relevance when it comes to RIM," says Scott Searls, a former senior vice-president of supply management for U.S. carrier T-Mobile. "It's almost no matter what they do, it's going to be considered too little too late, or merely table stakes."
Thorsten Heins, who took over as CEO of RIM in January after Jim Balsillie and Mike Lazardis stepped down amid pressure from investors, insists there's a future for BlackBerry as a third-ranked platform. He argues that once people understand the efficiency and productivity gains that BlackBerry 10 offers, RIM will not only be able to hang onto its core base of business and government users, but win back consumers too. If all goes according to plan, the first phone to be introduced next year will be a touchscreen, followed shortly by one with a full keyboard. In addition to the new, multi-tasking operating system, the phones will allow corporate IT managers to effectively split the devices down the middle, keeping work emails secure and personal data like Facebook posts beyond the reach of your boss. It's a recognition of the so-called BYOD trend, or "bring your own device," that many businesses have adopted after their employees--and in some cases, senior executives--begged to be allowed to receive their work email on their iPhones, creating all sorts of IT headaches. "We think we're really doing something different and innovative," says McLeod. "We absolutely think we will win back share in all markets around the world."
Of course, RIM investors have heard such talk before, only to be disappointed. But that was at a time when RIM's rivals were raising the bar with every new device launch. The pace of innovation has slowed. The iPhone 5, though faster and equipped with a bigger screen, still looks and acts a lot like the iPhone 4S. "That gives competitors the opportunity to stay on buyers' radar," says Levy
Carriers are also growing concerned that they've become overly dependent on industry heavyweights Apple and Samsung. More platforms mean more competition, which lowers the prices carriers pay manufacturers for their phones, boosting margins. "The carriers definitely want a third option," says Searls. "And so far, Microsoft hasn't got the traction that many thought it would." That, in turn, could translate into critical marketing and promotional support for RIM.
But even if it's a success, can BlackBerry 10 really save RIM? Searls says the best-case scenario is that a reinvigorated RIM gets bought by a competitor--likely Samsung--for something other than a fire-sale price. He notes RIM remains one of the few vulnerable smartphone manufacturers with a valuable portfolio of patents that has yet to be scooped up. "Samsung's going to be saying, 'If we don't go after RIM, then we have to expect one of our competitors will,' " Searls says.
For now, the challenge remains launching BlackBerry 10 on schedule and winning over skeptical and indifferent consumers. It's a tall order. But for the first time in months, there actually appears to be some semblance of a path out of the wilderness. As Levy puts it: "the light still flickers."
Maclean's 15 October, 2012