The RIM BlackBerry 10 arrives tomorrow (Wednesday) as the smartphone pioneer's last best hope to reverse its decline, but at this point the most Research in Motion Ltd. (Nasdaq: RIMM) can hope for is survival.
Research in Motion has steadily lost ground to its rivals since 2008, when it held 20% of the global smartphone market. According to research firm IDC, the BlackBerry was left with just 4.7% in 2012.
The loss of share is reflected in the company's earnings, particularly last year. RIM hasn't reported an operating profit for four consecutive quarters.
The change in fortune has wiped out the stock over the past several years. RIMM plunged from a high of $147.55 in mid-2008 to the $6-$7 range by late summer of last year.
But a preview of the BlackBerry 10 in September brought a little life back to the stock, driving it up over 180% to about $18 last week. RIMM has since slid back to $15.66 by Tuesday afternoon.
Several analysts have helped restore some faith in RIMM by expressing optimism about the prospects for the BlackBerry 10 to revive RIM's fortunes.
"While RIM has lost a huge amount of momentum and share, we also believe that the core installed base has been starved for a legitimate upgrade opportunity," Peter Misek of Jefferies & Co. wrote in a research note last week. He also upgraded RIMM to a buy.
Those who believe the BlackBerry 10 could be RIM's savior point to the installed base of nearly 80 million users.
"If only about a third of them buy this new phone, it will be a home run," Eric Jackson of Ironfire Capital said recently on CNBC. He suggested RIMM could double by the end of 2013. "Apple can't see that kind of return."
But while RIM could see some success with the BlackBerry 10, it faces steep challenges that will prevent it from doing much more than holding on to what's left of RIM's market share.
The Challenge for the RIM BlackBerry 10
While many tech critics believe the BlackBerry 10 will turn out to be at least as good as, and in some ways superior to the iPhone and Android phones, that won't be enough.
What won the hearts and minds of customers in BlackBerry's heyday were such features as push email, data synchronization, proprietary instant messaging, and best-in-class security.
Android and the iPhone can do most of those things now, and have robust app stores to boot. RIM still has the lead in security, but Apple has closed the gap there, too.
Unwilling to wait for the BlackBerry 10, a lot of businesses, such as Yahoo! (Nasdaq: YHOO), have ditched the BlackBerry for the iPhone, and they're probably not coming back.
What's more, RIM doesn't have the size – its market cap is less than $8 billion — to keep pace with the vast research and development resources of tech behemoths like Apple and Google.
And while RIM won't be alone trying to claw back share from those two dominant players. Microsoft Corp. (Nasdaq: MSFT) is also in the middle of a push to reclaim a bigger slice of the smartphone pie with Windows 8 and its partnership with Nokia Corp. (NYSE ADR: NOK).
What the BlackBerry 10 Means for RIMM
Investors need to take hard, cold look at RIMM before they get too excited about where the BlackBerry 10 might take the stock.
Short-term, a successful BlackBerry 10 could give RIMM a boost – and Ironfire's Jackson could be right about it doubling by year's end.
But if anything goes wrong with this product launch, including any technical glitches discovered by the early adopters, RIMM will sink back into the single digits in the blink of an eye.
And whatever success the BlackBerry 10 has will not be enough to propel the stock back to its 2008 highs, or even the $60 range RIMM was trading at just two years ago.
In the long run, the BlackBerry 10 will probably allow RIM to survive as a niche player in the smartphone market. Android and the iPhone are simply too dominant.
"RIM has an excellent shot at saving the firm with the BlackBerry 10," said Money Morning Technology and Defense Specialist Michael Robinson. "If they focus on the installed customer base, execute against the plan, make sure they have the right senior leaders in place, and pounce on any opening they get, they can save the firm. But it's not iPhone killer, that's for sure."
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