[Kekus]

Chris, I generally like reading your articles, I usually find you provide a good balance of fact and critical thinking. Kevin, I also like the fact that you leave discussions open for everyone to participate in - including the trolls (although there's a few I wouldn't mind seeing mysteriously disappear

Today's article on strategic alternatives was frustrating to say the least. The fact that at troll had the first comment made things worse. Instead of having some good thoughts shared, we let the troll control the dialog - which is too bad, we should have just ignored s/he.

As for RIM, what none of us have are hard facts on what's going to be released later this year. We also don't know how many customers are consumer vs. corporate. How many are locked into contracts until well past all the new phones are released later this year. We don't know how many phones RIM has in inventory or how much they're going to write them down by. We do know that there's an awful lot of companies that make a lot of money off of RIM and need them to succeed (HP, Cisco) to name a few.

We also don't know how much they make off of the developing countries - except that it's less than in N. America. We know Heins has been direct and honest - something missing in the past.

Apple was 90 days away from bankruptcy when Microsoft purchased $150 million in stock to keep them buoyant - no take over, no going private, just a smart business decision. Look where they are today!

RIM has 16.5k employees (before the potential layoffs) - if they paid each one $100k/yr they still wouldn't burn through their cash in a year (yes I know they have many other bills to pay - the bigger point being their cash reserves are set to increase in the current quarter).

Here's the real kicker in all of this - the consumer. Consumers are unpredictable, will change on a dime, and on the whole don't really care about what most techies think. They just want a phone that delivers what it promises at a fair price. If RIM can deliver this 'and' market it properly, they will survive and flourish. At this point their fate is in their hands - not the investors, not the competition.

One last thing - what I like best about RIM - it is truly is the 'World's Phone'. RIM is leveraging talent from Europe, the U.S., Canada while making technology accessible in India, Indonesia, Africa. They also give back to the community. Samsung is all about Korea, Apple's all about Apple & it's investors. RIM - it truly is the people's phone. I'd like to think Karma was enough for a company to survive - but we all know that's a crock - I do think the talented people at RIM, and the work they are doing will be game changing for the company. So for me, I'm Plan A all the way....

[amazinglygraceless]

I'm at a loss as to what any of what you just wrote here has to do with Chirs

Wouldn't it have just made more sense to type this in the comment section of the blog
post you are referring to as it makes no sense as a free standing thread.

[SurrealCivic]

I agree with a lot of your points. Especially the one about the site needing some kind of troll filter.

But can RIM really compete with Apple, Google, Microsoft, Samsung?

Can RIM sell 200 million units a year?

They are a $5B company, with $2.1B cash, declining sales, decreasing margins, and now about to post their first operating net income loss in over a decade.

The truth is that they cannot compete. Apple is worth $550B, Microsoft $250B, Google $200B, Amazon $185B, etc..

They need to change, they need to adapt, they need to innovate. The market is constantly changing, because it is growing!

More people around the world are purchasing smartphones, but RIM seems to sell less and less each quarter. I know, let's wait until BB OS 10, and then they will

be selling hundreds of millions of units a year, just like Samsung! This is very hard to believe in my opinion.

I have been saying this over and over, on comments, replies to post, and on my Twitter (@SurrealCivic).

RESEARCH IN MOTION WILL STOP MANUFACTURING HARDWARE AND FOCUS ON SOFTWARE AND SERVICES!

Research In Motion is going through a transition like never before. Having lived in Waterloo for over 15 years, I have watched RIM from pretty much infancy to global smartphone leader to where we are now (struggling to compete in this market with the likes of Apple, Google, Microsoft, etc).

Research In Motion has built some great phones throughout the years; the Curve, Bold, Pearl, Storm, Torch, Style series. Albeit some were poorly executed on (ie. Storm) and some never fit into the current market (Style). But most were winners. The BlackBerry Bold is one of the greatest QWERTY smartphones every created, to this day. The BlackBerry Torch was a great way for RIM to incorporate the QWERTY keyboard into a touchscreen slider. The Curve, probably the most successful consumer smartphone RIM created. But as the years went on, competition increased, input prices increased (commodities), costs of labour increased (worldwide); it has proved to become too expensive for RIM to manufacture hardware. I know the truth is sometimes hard to swallow, but this is a fact.

YEAR OVER YEAR, GROSS MARGINS FROM HARDWARE SALES ARE TANKING AT RIM!

Gross margins are the percent of total sales revenue that the company retains after incurring the direct costs associated with producing these goods. Therefore, the higher the percentage the more RIM makes from each dollar of sales.

On a GAAP basis, hardware gross margins of Research In Motion:

42% FY 2010
36% FY 2011
20% FY 2012

Now introduce less revenue on hardware, year over year, and you have RIM losing money on the manufacturing and selling of hardware!

Look at the competition out there, Apple (with FoxConn), Google (now with Motorola), HTC, LG, Samsung, Microsoft (with Nokia). And smartphones are becoming cheaper and cheaper each year, while input costs and labour keeps on rising.

Solution: Research In Motion needs to exit the hardware business!

SOFTWARE IS THE WAY TO GO

Research In Motion purchased QNX Systems from Harman International over two years ago. They have had time to develop it into a mobile operating system that can actually compete with iOS, Android, WinPhone. And not only that, they have an OS that can be used across many different applications and industries (Automobile, Airplane to name a few).

They have been spending a lot of money on the new QNX-based BlackBerry operating system. From the design process, to attracting developers, to building the tools to develop for this OS.

It is clear now, the focus is on software. They also have their services business which has high margins and makes them approx. $1B per quarter. They also have many patents.

RIM needs to exit the hardware business, focus on software, innovate their services (a long the lines of what Balsillie had in mind) and cash in on their patents (either through patent selling, licensing or even trolling).

RIM is going to look very different a year from now, and it will be better for the company and for consumers!

Thanks for reading my comment.
Martin...

If you would like to hear more of my analysis on RIM, please follow me on Twitter (@SurrealCivic)

[hurds]

Awesome post OP. Totally agree with your views on RIM. They know what they are doing. No one else had the foresight to make the acquisitions theyve made and all the changed they made in the past year.

[ALToronto]

OP, I agree with most of your post, except what you said about customers: that they want a phone that delivers what it promises at a fair price. My own observations are that customers follow the most effective advertisements, regardless of performance, price or functionality. And they love cool toys. Hence the popularity of overpriced mediocrity in the form of iOS devices, and the flashy games of Android. Delivering on promises? Sorry, that's just too boring for the average consumer.

[jrohland]

The idea that RIM must go out of business is silly. RIM does need to shed expenses until the company size matches the new reality of their market. I don't think they are going to have a major comeback in the US. That market is gone for a long time. RIM will, I believe, become a niche provider of premium mobile gear for the people who understand and appreciate the superior qualities of BlackBerry devices. They may become much more expensive and probably won't be sold by carriers. Neither of those bother me.

I would like to see them become leaner and more agile--with sympathies for those who will need to seek employment elsewhere.

It is obvious to me few people understand the seismic shift going on inside RIM. Try to image a company like Microsoft deciding one day Windows has reached the end of the line. So they buy, let's say Sun SPARC and rebuild their entire company and product line based on SPARC. That would be similar to what is happening in RIM. The casual observer thinks the rumored 6000 layoffs is because they are broke. As the OP mentioned, this is far from the case. However, if the bulk of the workforce is supporting a product line the company no longer intends to use, many of those people will need to retrained or let go.

[xandermac]

Awesome post OP. Totally agree with your views on RIM. They know what they are doing. No one else had the foresight to make the acquisitions theyve made and all the changed they made in the past year.

Foresight? You mean hindsight surely? If it was foresight we wouldn't even be discussing this topic.

[Kekus]

I'm at a loss as to what any of what you just wrote here has to do with Chirs

Wouldn't it have just made more sense to type this in the comment section of the blog
post you are referring to as it makes no sense as a free standing thread.

Chris was speculating on possible scenarios. While I understand that's a favourite past time of many, rightly or wrongly, I hold him to a higher standard. I'd prefer it when he sticks to facts. As for not adding the comment to the comment section, had it not been taken over by troll talk and diluted the conversation that's exactly were I would have left my comment.

[dbmalloy]

As RIM really has not been selling the amount of smartphones they would like... maybe they should switch their advertising to pomote the fact BB is not going out of business.... do not know how many times a week I have people ask me why I use a phone and tablet form a company that is going out of business.... Gets tiresome.... by the time BB10 hits the market... so many potential consumers will write it off because they think RIM is a dead company.... that is the danger which needs to be fixed now.....

As for the future... what is heartening is that RIM has "options"......

[Kekus]

Thanks to all for their comments. I do believe software is the future for RIM as well, but don't think they need to fully give up on the hardware just yet. Given their current inventory will be largely obsolete in 4-8 months (hopefully 4 months), the idea of trying to lower the value and clear it out while stockpiling cash makes sense to me. The operating losses will likely exist for a few more quarters, the question is how deep will they be because that will largely dictate how long they have before the run into cash flow problems.

As for me, I'm either a fool-at-heart, sucker for the underdog, or one of the many that sees the potential and really hope RIM pulls it out. Personally, I think it will be close, but they will pull it out in the end

[hurds]

Foresight? You mean hindsight surely? If it was foresight we wouldn't even be discussing this topic.

Nope. What discussion specifically?

I don't see any other company with the assests RIM has acquired and is more well positioned for the future. If they made the transition any earlier they would abandoning a perfectly capable platform that had yet to fully mature and will make them a lot of money for years to come. RIM has foresight. People who comment on RIMs current position are using hindsight but they don't realise this. They just repeat what we hear in the news every day unconsciously. Why weren't they saying this stuff 5 years ago when the iPhone came out, or 2 years ago when RIM acquired QNX.