Sell Research In Motion Now

by | Apr 17, 2011 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Innovation, Leadership, Lock-in, Web/Tech


Research in Motion pioneered the smartphone business.  While Motorola, Samsung and others thought the answer to market growth was making ever cheaper mobile phones, RIM figured out that corporations wanted to put phones in employee hands, control usage cost, while also securely offering email distribution and texting.  Blackberry handsets and servers met user needs while providing IT departments with everything they needed. 

This success formula was a winner, driving tremendous growth for RIM.  People joke about their “crackberry” connecting them to their company 24×7, but it was a tremendous productivity enhancer.  RIM produced a consistent string of growing revenues and earnings, meeting or exceeding projections.  RIM still dominates the “enterprise” smartphone business.  The overwhelming majority of mobile phones issued by companies are still Blackberries.

“RIM’s CEO is Annoyed that People Don’t Appreciate Our Profits” headlined Silicon Alley Insider.  He can’t understand why the stock languishes, despite meeting financial projections.  When challenged about whether or not RIM is as secure as it claims, “RIM CEO Abruptly Ends an Interview After Getting Annoyed About Security Questons” (SAI).

That the CEO is annoyed is the first of two reasons you need to sell RIMM now.  If you are waiting for a recovery to old highs, forget about it.  Won’t happen. Can’t happen.

The mobile phone/smartphone market has taken an enormous shift.  Apple’s iPhone introduced the “app” phenomenon – allowing smartphone users to do a plethora of things on their devices that aren’t possible on a Blackberry.  If we just count apps, as a baseline, iPhone users can do some 350,000 things that Blackberry users cannot.  Additionally, iPhones – and increasingly Android phones – are simply a lot easier to use, with bigger touch screens, more built-in functionality and easier user navigation. 

As charted in my last column, RIM has only about 5% the apps of iPhone.  And less than 10% the apps of Android.  Even Microsoft will soon provide more apps than Blackberry.  But the CEO of RIM is stuck – defending his company and its success formula – rather than aggressively migrating the company into new products.  He’s hoping all those company employees, including execs, now carrying 2 phones – their corporate Blackberry and personal iPhone – will keep doing that.   

He’s letting the re-invention gap between RIMM and Apple/Google widen with every passing quarter.  While no other provider offers the “enterprise solution” of RIM, increasingly the gap between the usability of new solutions and RIM is widening.  It won’t be long before users won’t put up with having 2 phones – and the loser will clearly be RIM

And it won’t be long before people completely stop carrying laptops as well. Rather quickly we are seeing a market shift to tablets.  Into this market RIMM launched its Playbook product last week.  And that’s the second reason you need to sell RIMM.

We all know the iPad has been a remarkable success.  To date, nobody has developed a tablet that users, or reviewers, find comparable.  Unfortunately, RIM launched its Playbook tablet to entirely consistent reviews, such as “The Playbook: Blackberry’s ‘Unfinished’ Product” headlined at TheWeek.com.  The Playbook simply isn’t comparable to an iPad – and doesn’t look like it ever will be.

Most concerning, to use a Playbook you must also have a Blackberry.  Playbook relies on the Blackberry to provide connectivity – via Bluetooth.  In other words, RIM is trying to keep customers locked-in to Blackberries, using Playbook to defend and extend the original company product.  Playbook doesn’t even look like it’s ever intended to be a stand-alone winner.  And that’s a really bad strategy.

RIM sees Playbook is seen as an extension of the Blackberry product line; the first in a transition to a new operating system for all products.  Not a product designed to compete heads-up against other tablets.  It lacks apps, it lacks its own connectivity, it has a smaller screen, and it doesn’t have the intuitive interface.  Basically, it’s an effort to try and keep Blackberry users on Blackberries – an effort to defend and extend the original success formula.

When markets shift it is absolutely critical competitors shift with them.  Xerox invented desktop publishing at its PARC facility, but tried to defend xerography and lost the new market to Apple.  Kodak invented digital cameras, but tried to defend the film business and lost the new market to Japanese competitors.  When the CEO tries to defend and extend the old success formula after a market shifts only bad things happen.  When new products are extensions of old products, while competitors are bringing out game changers, the world only becomes uglier and uglier for the stuck, old-line competitor. 

The analysts are right.  RIM has no future growth.  Companies are already switching  into iPhones, iPads and Androids.  Simultaneously, Microsoft will pour billions into helping Nokia push Windows 7 phones and future tablets the next 2 years, and that will be targeted right at “enterprise users” which are RIM’s “core.”  Microsoft will spend far more resources than RIM could ever match trying to defend its “installed base.”  RIMM is stuck fighting to keep current users, while the market growth is elsewhere, and those emerging competitors are quickly going to hollow out RIM’s market. 

There’s simply no way RIM can increase its value.  Time to sell.

Update 4/20/2011 Goldman Sachs Survey Results – CIO intention to adopt Tablets by Operating System provider:

CIO Tablet intentions by Brand 1-2011
Published in SiliconAlleyInsider.com

 

Apple is Simply Better Managed than Microsoft

by | Apr 7, 2011 | Defend & Extend, In the Rapids, In the Swamp, Innovation, Leadership, Web/Tech


Most folks know that Apple is now worth more than Microsoft.  Although few realize the huge difference.  After years of dominating as the premier “PC” company, Microsoft is now worth only about 2/3 the value of Apple – $224B versus $310B this week (or, said differently, Apple is worth about 50% more than Microsoft.)  Apple’s run by Microsoft the last year has been like a rock out of a slingshot.  But that’s largely because Apple grew revenues almost 50% in fiscal 2009 and 2010, while Microsoft saw revenue decline 3% in 2009, and only grow 7% in 2010, putting revenues up a net 3% over the 2 years. 

What few realize is how much Microsoft spent trying to grow, but failed.  A look at 2009 R&D expenditures showed Microsoft outspent all tech competitors in its class – spending 8 times what Apple spent! RD cost MSFT and others 2009 Source:  Silicone Alley Insider Chart of the Day from BusinessInsider.com

What did customers and investors receive for this whopping Microsoft spend? An updated operating system and set of office automation tools to run on existing products.  Nothing that created new demand, or incremental sales.  On the other hand, for its much lower spending Apple gave investors upgrades to iPods, the iPhone and the operating system for the later released iPad. 

Simply put, Microsoft opened the check book and spent like crazy in its effort to defend its historical PC products business.  And the cost was more than just dollars.  That “focus” cost Microsoft its position in other growth markets; like smartphones.   Few recall that as recently as 2008 Microsoft was the leading smartphone platform: Smartphone platform share 1.10

In order to defend its “core” business, Microsoft under-invested in smartphones and over-invested in its historical personal computing products.  Now, PC growth has stalled as people are switching to new products based on cloud computing – like smartphones and tablets. 

Apple is cleaning up with its investments, while Microsoft is hoping it can catch up by enticing its former executive, now the CEO at Nokia, to revamp their line using the Windows Phone 7 operating system.  Good luck, because the market is already way, way out front with Apple and Android products

Number smartphone apps by competitor 3.2011

That was the past.  What we’d like to know is whether Apple will keep growing like crazy, and whether Microsoft will do what’s necessary to grow as well.  And that’s where some recent announcements point out that Apple, quite simply, is better managed.  So it will grow, and Microsoft won’t.

ZDNet reported on the “changing of the guard” at Apple in March.  Due to its different investment approach, iOS is now bigger than the MacOS at Apple.  The “legacy” product – that made Apple into a famous company in the 1980s – has been eclipsed by the new product.  And the old technology leader is graciously moving on to do research in a scientific community, while Apple pours its resources into developing products for the future. 

Don’t forget, the Lisa was a product that Steve Jobs personally took to market – yet didn’t succeed.  He personally remained involved, converting Lisa into the wildly successful 1980s Mac (see AOL Small Business story on history of Lisa and Mac.)  You gotta love it when that CEO, and his leadership team and all the managers, can transition their loyalty and put resources into the future product line in order to keep growing!  MacOS is not dead, nor is it going to be devoid of resources.  But the future of Apple lies in growing the new platform, and that is where the best talent and dollars are being spent.

Comparatively, Microsoft announced this week it was changing its Chief Marketing Officer (SeattlePI.com.)  And, not surprisingly, they did NOT select someone with smartphone, tablet or even gaming expertise for the role.  Instead of identifying a leader who is deep into understanding the growth markets, Microsoft appointed as the next CMO the fellow who had been responsible for selling – wait – guess – Office, Sharepoint, Exchange and the other historical, legacy Microsoft products.  Those products which have had no growth – only maintenance sales.  Instead of reaching into the future for its leadership, CEO Ballmer once again reached into the past.

If you ever wonder why Apple is worth so much more to investors than Microsoft, just think about this moment in the marketplace.  Apple is investing its best talent and resources into new products in new markets that are demonstrating growth.  Microsoft, struggling with its growth, keeps placing “old guard” leaders into top positions, attempting to defend the historical business – hoping to recapture the old glory. 

Too bad the market has already shifted and doesn’t care what Microsoft thinks.

When it comes to networking, cloud computing and the future of how we all are going to be productive Microsoft just isn’t in the game.  And its attempt to have a fast falling Nokia save it by distributing second rate mobile products that are late to market while iPhones and Androids keep extending their lead won’t make Microsoft great again. Especially when the leadership keeps wanting, in its heart, to sell more PCs.

Apple is just better managed, because it keeps looking to the future, while Microsoft simply can’t seem to get over its past.  Good thing Steve Ballmer is already rich.  Too bad all the Microsoft employees aren’t.