How RIM Must Redefine Itself to Survive

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Times are tough for BlackBerry developer Research in Motion (NASDAQ:RIMM). The stock was trading below $26 on Wednesday after Apple (NASDAQ:AAPL) announced its earnings for the second quarter of 2011. The fall was symbolic of how drastically things have changed for the company.

The last time RIM was trading below $26 was in 2005, right before the company’s smartphones became ubiquitous among U.S. businesses looking to modernize their work forces with the hottest technology. Now, RIM has watched its role as a business technology icon be eroded by the popularity of Apple’s iPhone and phones running Google’s (NASDAQ:GOOG) Android.

It’s all over for RIM, right? There’s no coming back? There’s plenty of evidence to suggest that’s the case. RIM is cutting costs to make up for these losses. The company announced Monday that it was cutting almost 11% of its work force – 2,000 jobs from its base of 17,000 employees. The company reported disastrous earnings June 16, an event that kicked off the massive decline in value during the past month.

The erosion of its share in the worldwide mobile phone market was spelled out in black and white June 9 when IDC released its Worldwide Quarterly Mobile Phone Tracker report. Just 14% of smartphones shipped during the first quarter of 2011 were BlackBerry devices, compared to 19% during the same period in 2010. IDC is projecting that RIM will see its share decline to just above 13% by 2015.

Worse yet is the apparent failure of its flagship device for 2011, the PlayBook tablet PC. RIM shipped more than 500,000 PlayBooks between its release in April and when the company reported earnings in June, but shipments do not equate sales for the device. It also appears  RIM’s bread and butter – businesses – already have made their choice when it comes to tablets. Business mobile technology management provider Good Technology issued a report Thursday that found that 27% of the mobile devices activated by businesses during the second quarter were tablets. Of those tablets, 95% were Apple iPads. The remaining 5% was split between Google Android devices and presumably RIM’s PlayBook, though it wasn’t mentioned by name.

There was a glimmer of hope for the company on Thursday, however. At the same time Good Technology released its report on U.S. business mobile technology, RIM announced that the PlayBook was the first tablet PC to receive Federal Information Processing Standard certification. That certification means it will be the PlayBook, not the iPad, used by U.S. government agencies. Senior VP of Blackberry security Scott Totzke said the PlayBook received certification because it met the needs of “security-conscious” organizations.

Government agency support will go a long way toward making the PlayBook a profitable venture for an ailing company. More than that, however, RIM has an opportunity to redefine itself for the new mobile market. It’s no longer enough to be the face of business technology. RIM must now define itself as the most secure and serious-minded platform for users. Apple and Google have locked down the consumer market. Clever apps won’t win back RIM’s audience. The company needs to take its Federal Information Processing Standard certification and say, if a company wants its work force to use secure tablets and smartphones, “We’re your company.” Then maybe it can begin to rebuild its value, just like it did in 2005.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.


Article printed from InvestorPlace Media, https://investorplace.com/2011/07/rim-blackberry-redefine/.

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