Friday, January 13, 2012

'Crackberry' Addiction on the Wane

The coolest of all mobile devices used to be the Blackberry which is made by Research in Motion (Nasdaq: RIMM). Its qualities made it almost addictive to its users, hence the nickname 'Crackberry'.

But all that began to change in 2007 with the introduction of the touchscreen-based iPhone from Apple (Nasdaq: AAPL).

Today, many of the former 'crackberry' addicts now carry around an iPhone or a smartphone with the Android operating system developed by Google (Nasdaq: GOOG).

In the key North American market, which accounts for 40% of sales for RIM, Blackberry is rapidly losing market share.

According to figures released in early December by market research firm ComScore, the company's share of the U.S. smartphone market fell by 4.5 percentage points to 17.2% in the three months ending in October.

Globally, Research in Motion is not faring any better. IT research firm Gartner estimates that RIM's share of the worldwide smartphone market fell to 11% in the third quarter, down from 15.4% in the year ago period.

Why has this happened? A series of management mistakes and product delays can be blamed. For instance, the one winning product they have – BBM or Blackberry Messenger – is being constantly played down and ignored by management while they continue pushing losers like Playbook.

Things don't look like they will get better any time soon either. The company recently announced a $485 million pre-tax writedown on the value of unsold Blackberry Playbook Tablets. RIM had already been forced to lower the price of the Playbook, which the company had touted as the product which would replace the iPad, from $499 to $199.

RIM also recently took a $50 million charge against revenues to cover the network outage it suffered which left users unable to access its network for days.

These problems, of course, have crushed the stock of Research in Motion. From more than $70 a share a year ago, RIM's shares just hit another 52-week low on Friday to just above $13 a share, a drop of more than 80%.

Can Research in Motion somehow recover from these missteps?

One hope is that the company successfully makes the transition from products based on its old Blackberry operating system to products based on its new operating system, called BBX. Next-generation devices, based on BBX, are expected to hit the market sometime in the first half of 2012.

Another hope is the aforementioned BBM instant messaging service. It looks similar to SMS text messaging, but is both faster and cheaper, coming without the need for a data package. And it is probably the sole reason individual consumers now outnumber business users of Blackberry. BBM is extremely popular among young people in the U.K., Netherlands, Brazil, Indonesia, South Africa and the Middle East.

But it is unlikely any turnaround will occur under the leadership of the co-CEOs of Research in Motion – Mike Lazaridis and Jim Balsille. They have stuck too long with RIM's aging portfolio of products and seemed to have lost touch with the company's user base.

Investors are advised to steer clear until a management change occurs.

Article originally written for the Motley Fool Blog Network. Check out my daily articles for the Motley Fool at

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