RIM Can Survive Only by Making Tough Decisions Quickly

NEWS ANALYSIS: Research In Motion is running out of options and may soon be forced to put itself on the sales block, but who will buy the troubled company? Microsoft? Samsung? While there is still life in RIM, the company needs to make some tough decisions quickly.

Research In Motion€™s earnings call showing huge losses by the Waterloo, Ontario-based company was not a huge surprise. Hardly anyone was expecting good results. But what followed was a series of surprises that went off like depth charges around a sinking submarine.

BlackBerry 10 wouldn€™t arrive until the first quarter of 2013, and there will be 5,000 layoffs. Couple that with the earlier announcement that RIM had hired JPMorgan and RBC Capital to review its strategic options, and the picture is bleak.

So it€™s no wonder that RIM opened June 29 off 15 percent on Nasdaq and then continued to fall. The market clearly has lost faith in RIM€™s ability to hang on for the next six to eight months until BlackBerry 10 arrives. This is made worse when everyone realizes that BlackBerry 10 is RIM€™s last hope. If BB10 is dead on arrival, then it€™s not going to be a long good-bye. RIM as we know it will perish.

So the real question now is what are RIM€™s options? Obviously, the hiring of two major investment banks that deal in mergers and acquisitions means that RIM is planning to sell something. But it may not be the company itself. RIM may have decided that it€™s time to offload its device manufacturing and move to contract manufacturing, which is what most other smartphone companies do.

Notably, the companies that are making money on smartphones aren€™t making them in Canada, and most aren€™t making anything themselves. While Samsung, which is the world€™s largest phone maker, does build its own phones, Samsung is also one of the world€™s largest contract manufacturers. But Apple doesn€™t make its own phones; those come from Foxconn factories in China. Google doesn€™t make its phones either. Google-branded phones and tablets are made by somebody else, such as Asus or HTC.

Having Samsung, for example, build the BlackBerry 10 device would mean that the company can focus on its software and its data-delivery business, which is RIM€™s strong suit. When I saw the BlackBerry 10 prototype platform at the BlackBerry World conference in May, I didn€™t see any distinguishing feature that wasn€™t done in software. In other words, there wasn€™t anything in the BB10 device that couldn€™t be made by a generic smartphone maker.

At least by moving to a contract manufacturing model, RIM could work with companies that have great expertise in bringing hardware platforms to market and meeting specific and detailed requirements. The Apple iPhone 4S is an excellent example of what can be done with contract manufacturing. There€™s a strong likelihood that adopting a similar model would give RIM lower costs without any loss of quality or control.