Published on Friday September 21, 2012 Michael Lewis Business Reporter
With Apple Inc.’s iPhone 5 leading a parade of flashy new mobile devices onto store shelves this fall there would seem to be little room for the late-to-the-game next-generation BB 10 smartphones from Research in Motion.
Even if RIM launches compelling phones on schedule in the first quarter of 2013 after delays pushed the rollout past the critical holiday shopping season, Canaccord Genuity’s T. Michael Walkley says the debut won’t be enough to halt the company’s slide.
As RIM stock tumbled another 6 per cent on a short-lived but embarrassing service outage in Europe and Africa Friday, the day the iPhone 5 went on sale, Steven Li of Raymond James said the long wait for a BlackBerry lineup in a fast-moving, hyper competitive market means “the chance for a comeback is diminishing.”
RIM shares fell 50 cents to close at $6.25 in trading on the TSX Friday.
The latest outage, which analyst Peter Misek of Jefferies and Co. linked to the company’s efforts to transform its network infrastructure to an entirely new operating software, brought back memories of a five continent BlackBerry service disruption a year ago that also coincided with an iPhone launch.
Then co-CEO Mike Lazaridis apologized to inconvenienced customers via YouTube three days into the failure, but this time around successor Thorsten Heins issued a mea culpa immediately.
He said results of an investigation into the email and Internet disruption that ended after about three hours would be reported as soon as they’re available.
The outage comes as customers ditch their aging BB 7 BlackBerrys for iPhones and Android devices, and follows news that Internet firm Yahoo Inc. will not support BlackBerry for its employees.
It also comes on the heels of reports that corporate clients will need to temporarily run an added servers to accommodate both RIM’s legacy phones and its new lineup.
Still, according to Silicon Valley based tech analyst Rob Enderle, RIM has a chance to leapfrog rivals’ technology with its new phones just as they have adopted some of the BlackBerry and PlayBook tablet’s unique features.
He said the iPhone 5, while a red-hot seller, has not moved the innovation needle much, while he suggested software developers are increasingly frustrated with the complexity of working with the array of Google Inc. Android phones that have become a dominant global force.
And while HTC, Motorola, Microsoft and Nokia have all introduced smartphones that are expected to be available in various markets in coming weeks, Enderle said the industry is in a technological consolidation, with new and refreshed devices focused on improved speed and performance, rather than revolutionary change.
That leaves RIM with a “real opportunity to do some interesting stuff.”
Enderle said RIM could build on its relationship with the U.S. military to improve Wi-Fi integration and add new security components to the devices. It could offer phones with a firewall between corporate and personal functions on a single handset. It could introduce phones that allow displays to be seen in bright sunlight, with wireless recharging and with features that secure devices to the body to prevent loss or damage.
Starting Tuesday, RIM will host a developer conference in Silicon Valley where it will likely showcase a new preview version of its BB 10 smartphone for developers and show some of the model’s features and consumer apps that may include video streaming service Netflix and new Skype Internet protocol voice calling capabilities.
Heins’ challenge will be to generate excitement over devices that have been previewed, but which could have a number of new and unique features at launch. He will also have to overcome skepticism among analysts who don’t expect profound BB 10 innovations to be unveiled either at the Americas Jam or on product launch next year.
So far, RIM has revealed prototypes of phones that feature an entirely new user interface, an intuitive virtual keyboard along with a physical version, a unified inbox for multiple email accounts, text messages, BBM and call history and so-called flow and peek functions that let users move across open apps, as well as Siri-like voice activation controls.
In the meantime, however, RIM needs to make it through the next few months without severely depleting its cash of $2.2 billion as of the last quarter.
Pacific Crest analyst James Faucette in a note to investors said recent retail checks show not only a significant decline in BlackBerry inventory, but shelf space pressure and lacklustre sales as well.
“In terms of sell-through, we believe that current run rates are roughly one-fifth of those we saw in the United States just eight months ago. Further, we found a meaningful number of carrier retail locations which had not sold a single BlackBerry in over a month,” he said.
“Even assuming that BlackBerry 10 devices roll out on time starting in 2013, we believe the clear evidence of shelf-space pressure our checks have detected does not bode well for the company in the longer term.”
Faucette’s suggestion falls in line with the consensus of analysts surveyed by Bloomberg, who suggest RIM may unveil another inventory writedown in its earnings report next week. The average forecast is that RIM will show a 40.9 per cent sales drop over last year and a loss of $0.47 per share including charges for layoffs and goodwill, compared to a profit of $0.80 last year. It could also provide an update on its cost reduction program, and may confirm that its global customer base has reached 80 million.
“I’m sure there will be lots of negatives, which should no longer be surprises,” Kris Thompson of National Bank Financial said in an email.
