BlackBerry 10: Delays, Licensing, and Possible RIM Salvation

by Brad Moon | January 24, 2012 3:25 pm

BlackBerry 10: Delays, Licensing, and Possible RIM Salvation

New Research In Motion (NASDAQ:RIMM[1]) CEO Thorsten Heins hasn’t had the warmest reception since the company’s blockbuster weekend announcement that he would be replacing co-CEOs Jim Balsille and Mike Lazaridis.

Heins’ declaration this week that no “seismic changes” will be forthcoming sent RIM’s stock into the Nasdaq doghouse. And he is aware many investors want to take away RIM’s kibble.

RIM hardware has been criticized for being so previous-generation (thanks in part to comparatively low-resolution displays and underpowered processors), but what’s really taken the air out of the Canadian tech company’s sails has been the BlackBerry operating system (or BBS)–the software that powers the devices. When Apple’s (NASDAQ:AAPL[2]) iPhone launched in 2007, it was running the freshly minted iOS, a “next-generation” operating system that was free of legacy baggage and which quickly proved superior to BBS.

While iOS has only gotten better with subsequent releases (it’s currently on version 5) and Google‘s (NASDAQ:GOOG[3]) Android operating system has also become a force to be reckoned with, BBS has fallen further behind. The recently revealed BlackBerry OS (BB7) has been roundly criticized as being a stopgap that will do little to stem the exodus of BlackBerry users.

A rough ride for BlackBerry software

The salvation of RIM was supposed to be the 2010 purchase of QNX Software Systems from Harman International (NYSE:HAR[4]). QNX had built a reputation for providing rock-solid system software used in the automotive, medical, aerospace, telecommunications and defense industries. If QNX was good enough for these demanding applications, it should be more than capable of powering the next generation BlackBerry operating system.

The architecture of the QNX operating system is intended to provide real-time multitasking, a feature that is valuable in a multipurpose device and would allow RIM to leapfrog ahead of other mobile platforms in this key area. Apple itself had followed a similar path when it ditched its desktop operating system in 1996, to bring Steve Jobs back into the fold in with his NeXT OS (which became the foundation of Apple’s current Mac OS X). Unfortunately, things have not played out as smoothly as RIM would have hoped. Among the stumbles:

Exploring licensing alliances

Could licensing be in the works? RIM shares temporarily rose in previous weeks on rumors the company was in conversations with Samsung (PINK:SSNLF[5]). While a purchase of RIM seems unlikely (Samsung makes its own successful smartphone and tablet hardware, and is giving Apple a run for its money), the possibility of Samsung licensing BB10 isn’t all that remote.

The Korean company currently uses Android to power its devices, and the ability to offer BlackBerry products could offer it a way to differentiate its products from the dozens of other Android smartphone makers, while also possibly cutting the rising costs of licensing Android.

Another factor that might support the theory that RIM is pursuing licensing as an option is the rumored trimming of the handset lineup the company intends to release later in 2012. Why release a slew of smartphones if they will be competing against versions released by other manufacturers? During his first conference call as CEO, Heins refuted rumors that licensing BB10 was a focus for now, but did add that he would be willing to entertain the idea.

Take that as you will, but with Microsoft (NASDAQ:MSFT[6]) scooping anywhere from $3 to $6 in licensing from every Android device, and with the potential to earn $1 billion or more yearly in royalties (Google itself doesn’t charge manufacturers for use of Android OS) clearly there is money to be made in licensing a mobile operating system.

It could well be that buying a software company with a reputation for building a bulletproof operating system that’s trusted to power a wide range of mission-critical systems may have been the right choice for RIM. On the other hand, QNX typically runs systems that don’t need to sip energy, a key requirement for mobile devices. And the RIM and QNX engineers are obviously having a tougher time than expected in porting BlackBerry’s key features into the QNX platform. While the QNX-based PlayBook 2.0 OS is an encouraging sign after several years of stumbles, it remains to be seen whether BlackBerry 10 will save RIM from becoming a smartphone industry footnote.

Endnotes:
  1. RIMM: http://studio-5.financialcontent.com/investplace/quote?Symbol=RIMM
  2. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  3. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  4. HAR: http://studio-5.financialcontent.com/investplace/quote?Symbol=HAR
  5. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  6. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT

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