My musings on the economy, life, technology, business and things I find interesting.

Monday, February 15, 2010

Can RIM maintain its Stellar Growth?

There is a lot to admire about Blackberry:
  • Great at email
  • Multitask applications
  • Integrates well end to end for corporate customers running Exchange and other corporate solutions
  • Strong battery life
  • Security and stability focused platform
  • Bulletproof drop worthy devices
I like all these, but there is much I hate about my Blackberry
  • Extremely closed API limits developer innovation
  • Arrogant parent company
  • Single point of failure for corporate customers (I'd bet money there is more than one but it's not an open IP standard design that fails gracefully)
  • Slow to innovate
  • Lots of different phones but really only 3 types to choose (touch, normal, small)
  • Available applications suck - we actually did 3rd party development back in the day and it was evident their developer community got a half hearted effort at best.  More RIM window dressing while management continued on their stodgy way.
In general a lot of this stems from how RIM runs their business:
  • Innovation comes from the top down
  • They pretend they like to hire talent but the management and HR system doesn't execute on this
  • Took them forever to get that consumers mattered and that mobile computing actually means more than email, although I still don't think they actually get it.  I remember a talk by Mike L. at UW when I was a student and the arrogance was incredible - but he's a billionaire so discount accordingly :-).
  • While Google and Apple want fans RIM seems to want to simply talk down to you about how stupid you are for not choosing them.  I guess they have all these fancy Love commercials but this seems like lipstick on a pig, we'll see: maybe they are trying to move fast and listen to the customer.
Don't get me wrong I get why RIM has made so much money and become successful, they've executed brilliantly on the corporate angle.  I just question whether they'll execute as brilliantly in a environment that is about to work against their style of business.  I've been seeing them try to turn the ship from stogy corporate email device to cool consumer friendly device for years, so far its a decent effort in general but brutal compared to what they could have done.  Ultimately mobile phones are the PC market in the early 90s, eventually they'll become a commodity, data rates will plummet, platforms will open, people will get voice, video, etc. for super cheap on any platform.   RIM isn't setup to succeed in a commodity market, they're the opposite of Acer or Dell - they're the arrogant pricey dictator, Apple is the cool pricey hipster and there are tonnes of companies that will fill the commodity role nicely.  RIM needs to expand beyond governments and corporate board rooms - I think the odds are against them.


Jeff said...

Chris, nice post. Pretty much agree. I wrote something similar over on my blog from a developer/ISV perspective.

Tom said...

Saw both of your posts thanks to Alex's retweet. Nice analysis.

I think RIM's culture and inertia will eventually kill it.

But since its bureaucratic corporate customers share the same "stogy" attributes, RIM might stay alive for longer than one might expect.

Sure: smaller, more agile businesses are already switching to Apple, etc.

But big business and government will take longer - maybe years longer.

Until then, RIM will have enough revenue to sustain itself. But you won't catch me owning any stock :-)

Christopher Reid said...

Cool - comments. I can count my blog visitors on one hand so this is kinda cool :-). I think RIM will be around for awhile and I agree that they'll maintain a nice share of the corporate space. I think their growth plan is less viable then they think and I wonder how well they'll come to terms with that. I don't think RIMs structure bodes well for reinvention from within so may concern is how much do they burn trying to be something they're not setup to be. Thanks for the comments.

Christine said...

hey chris, i really like the cartoons on the top!!!

cousin christine

Ron said...

Hey Chris:

According to an article from Canadian Business (February) on BlackBerry, here is some math on the value of the network operation:

Users= 36 million, Royalty per subscriber= $36-$120 per year (average= $78 per year), Total wireless royalty revenue per year= $2.8 billion annually (article claims $1.4 billion).

From a strategic business development perspective, why, when Blackberry's data centres: (1) strip viruses from email/attachments, (2) ensure security in the transmission of messages using proprietary encryption technology, and (3) employ proprietary compression technology that saves all wireless vendors serious capital infrastructure investments, did the company UNDER VALUE the royalty/percentage on wireless contracts?

Can't figure that one out. Can you help?

Christopher Reid said...

Hi Ron, I'm not sure I'd have to read the article, I don't really have enough info to give a good answer but I'll try anyhow :-). Let's assume that this calculation was carried out for business valuation purposes, say for instance in doing a value analysis vs market capitalization to see if RIM is a good investment. Typically assets are valued based on future earnings not revenue, the numbers you've listed sound like revenue numbers, so this may explain the discounting. All RIMs fancy stuff is why they get big royalties - they're baked in so we can ignore them. Assuming you'
re just valuing the current network and ZERO future growth and you're willing to pay 5X earnings (wait 5 years to recoup before interest/compound growth) then the article is imploying that RIM makes 460M in profit from its network. Again this is a shot in the dark to help you understand what may be happening but certainly not what is happening.