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RIM's grim earnings news should not put off enterprises

If RIM can solve touchscreen with coming QNX, it could resurface

Minutes after Research in Motion on Thursday announced job cuts, delays in product shipments and a reduced earnings forecast, one of RIM's co-CEO's declared that it was still "fun" doing his job.

It was the kind of comment that has analysts and others scratching their heads over RIM, which has amassed strong devotion from enterprise IT managers for years even as it has struggled to attract consumers to its smartphones.

"I have a lot of respect for everything RIM has accomplished over the years, but going forward is another story," said independent tech analyst Jeff Kagan. "They seem to not get it ...The comments coming from RIM worry me."

RIM's first-quarter results announced Thursday included several disappointments to Wall Street that sent its stock price tumbling by more than 15% after markets closed. Among the disturbing revelations:

  • BlackBerry smartphone sales saw the first quarterly drop since 2005, with 13.2 million sold in the quarter, down from 14.9 million in the previous quarter;
  • New smartphones running BlackBerry OS 7, including the Bold 9900, will debut late in the second quarter, missing the back-to-school sales period;
  • Phones running the new QNX operating system won't appear until early 2012;
  • A previous full-year earnings forecast of $7.50 a share was dropped to between $5.25 and $6 a share.

RIM said it would begin an undisclosed number of layoffs in the current quarter that ends in Aug 27. It has about 17,500 workers.

One bright spot in the report was that 500,000 BlackBerry PlayBooks were sold in the first quarter, following the launch of the 7-in. tablet April 19. RIM didn't give a date for when it plans to roll out a free update for native email for the tablet, which has been promised for this summer. Also, the release of the 4G version of the tablet with LTE, WiMax and HSPA+ has been delayed from this summer to this fall, RIM said yesterday.

Despite the grim news, co-CEO Mike Lazaridis declared RIM a "strong business" that is undergoing a transition to major platform upgrades.

When asked whether RIM is hurt by a co-CEO structure shared by Lazarides and Jim Balsillie, Lazaridis responded: "We work very closely together, and I don't know where all these things are coming from. The thing you have to understand is that this is fun."

Several analysts defended RIM and its strong role in the enterprise, but noted RIM's product challenges and other missteps in a market that is crowded with successful tablets and smartphones running Apple iOS and Android.

"I think they never thought they would be in this position," said Ken Dulaney, an analyst at Gartner. "You can see from the Lazaridis interviews online that he isn't absorbing this failure. He is probably having trouble coping with the fact that his products are no longer the top dog."

Still, Dulaney and others said IT managers should not give up on RIM because of its strong approach to security and management of distributed wireless devices. "Their platform is very good for enterprises," Dulaney said. "Remember, they still have the best keyboard device and there is a significant population of users that likes keyboards. It's just no longer 90% anymore."

Dulaney said RIM's principal failing has been in not creating a popular touchscreen smartphone, a problem also facing Nokia and Microsoft . The BlackBerry Storm and its touchscreen were a disappointment, he said. "Whether they do well or not is determined by the touchscreen. We at Gartner like RIM in the enterprise and they do a good job, but my customers tell me they are disappointed that RIM hasn't solved this touchscreen problem."

The proof point for RIM seems to be how well it will handle the new QNX operating system in new phones appearing in 2012, analysts said.

"BlackBerry is the still the gold standard when it comes to security and manageability," said Jack Gold, an analyst at J. Gold Associates. "And for many sensitive apps, it's the only platform that can meet all the compliance standards. That said, that's not enough to keep users from wanting to go with an alternative. So the challenge for BlackBerry is to build a highly secure and manageable phone, which still offer many of the consumer-friendly features that users want. That is not an easy problem to solve, as many of the consumer-friendly, user-interface-friendly apps are notoriously insecure and the devices are easily hacked."

RIM could come into fashion again in a year or two if its leaders make the right moves, analysts said. "It wasn't that long ago when BlackBerry was perceived as being cool and a have-to-have-one phone," Gold recalled. "But that was before the iPhone and Androids changed perceptions."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed . His e-mail address is mhamblen@computerworld.com .

Read more about smartphones in Computerworld's Smartphones Topic Center.


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