BlackBerry battered but not beaten

Research In Motion's (RIM) latest earnings and outlook report was, as anticipated, not terrific news for the BlackBerry maker. But, as the song says, when the world is running down you make the best of what's still around (apologies to Sting).

And so it is for RIM. Investors were expecting to be let down as 2012 inches ever closer and the anxiety over whether or not the Canadian tech giant would stay the course with the release of its BlackBerry OS 10. In that regard, they weren't disappointed. RIM remains profitable, but its profitability is shrinking largely due to its aging lineup of BlackBerry smartphones and the seemingly unwanted PlayBook tablet. Unfortunately, investors' fears appear to have come home to roost as RIM says its next-generation BB OS 10 smartphones won't be released until the second half of 2012.

Kevin Restivo, mobile phone analyst for IDC Corp., says the disappointing fiscal third-quarter results were inline with what RIM said would be forthcoming. The bigger issue is future days.

"The fiscal Q4 outlook is troubling because it encompasses the holiday season which traditionally has been a very strong season for RIM. If you look at 2012, the company has said its BlackBerry 10 lineup or at least a BlackBerry 10 phone will not be introduced until (the latter half of '12)," he says. "That sets the stage for potential unit shipment weakness. The BlackBerry 10 lineup was supposed to reinvigorate RIM's growth."

The Canadian tech giant now has next to no margin for error, Restivo adds. "RIM has to hit a homerun with BlackBerry 10," he says. "This company is still profitable and it still has a cash pile to draw upon. Its subscriber base is still growing to some degree."

On an optimistic note, Warren Shiau, director of Research, Consumer Insight & Technology, Leger Marketing in Toronto, says RIM's co-CEOs Jim Balsillie and Mike Lazaridis will have recaptured credibility by not sugar-coating bad news.

"What they need to do now is spend all the compensation they're not paying themselves (the co-CEOs cut their salaries to $1 per year apiece), add another $20 million to it, and hire the best Chief Operating Officer (COO) there is and the team that new COO wants," he suggests. "Go hire the best head of software development and the project management teams available. That's what RIM needs: Operational, development and project management excellence and leadership."

But Shiau warns BB OS 10 is not a cure-all for the company. While it may level the playing field versus competitors' platforms in a technical sense, that won't equate to big sales necessarily.

"To get sales to stabilize its position RIM needs hardware that will be fully competitive from the high-end all the way down to budget smartphones," he says. "RIM needs better hardware than the competition, more carrier support than its competitors, and a developer ecosystem that delivers more excitement and entertainment than its competitors on top of great functionality."

Turning to international markets, where RIM has been doing far better than in North America, IDC's Restivo says growth abroad has to be expanded upon to off-set the weak showing at home.

"RIM is going to have to fend off Android, which is the primary threat with the number of hardware manufacturers shipping Android phones to international markets," he says. "Android is the bigger risk to RIM's growth in international markets. It's not all Android phones but the sub-$150 phones."

Of the PlayBook tablet, Restivo adds RIM has to stay the course with its current strategy.

"They have to keep PlayBook alive. RIM has no choice. Because it's the litmus test for developers when it comes to BlackBerry 10," he says. "If RIM is to sustain and grow its developer interest it has to keep the PlayBook and to show them what the potential is for developing for BlackBerry 10 smartphones.

"It's incumbent upon RIM to show developers as much as possible to sustain that interest level."