Research In Motion and Nokia are competitors in the
smartphone space. But when it comes to long-term strategy, it’s increasingly
clear the two embattled companies are very much in the same boat.
Both have faced a tumbling stock price, executive shakeups
and analyst negativity about their future prospects.
RIM earned $4.9 billion in revenue for the first quarter of
fiscal 2012, down 12 percent from the previous quarter. Net income also
declined, and executives on a June 16 earnings call acknowledged softening
sales for the company’s increasingly antiquated BlackBerry line.
“The shortfall in the United States is primarily related to
the age of the BlackBerry portfolio,” Jim Balsillie, RIM’s co-CEO, told
analysts during the call. RIM is planning to lay off employees and start, in
his words, the “streamlining of operations” in order to place the company in a
more competitive position.
Meanwhile, Nokia is also facing some tough times. The rise
of Google Android has eaten into the Finnish company’s previously ironclad lock
on the lower-end phone market, and analysts have frowned on CEO Stephen Elop’s
decision to abandon the company’s homegrown Symbian operating system in favor
of Windows Phone.
“We would continue to avoid the stock as Symbian smartphone
sales are falling off faster than expected and we are skeptical that new
Windows Phone (WP) models will be able to replace lost profits,” Stephen Patel,
an analyst with Gleacher & Co., wrote in a May 31 research note. “Our
checks suggest mixed carrier support for Nokia’s transition to WP.”
Both RIM and Nokia have placed their fates in the hands of
an upcoming operating system, which will supposedly reinvigorate their
respective brands. In RIM’s case, it’s a set of “superphones” based on its QNX
operating system, which currently powers the company’s PlayBook tablet. And
Nokia is betting all on the aforementioned Windows Phone, a next-generation
user interface designed by Microsoft as a replacement for its own Windows
Mobile franchise.
But it’s a question of timing.
RIM’s QNX-powered phones aren’t expected to reach the market
before the second half of 2012, requiring the company to rely on BlackBerry OS
7 and upcoming devices such as the BlackBerry Bold 9900 and 9930. While the
latter fit neatly into RIM’s overall design aesthetic, they’ve failed to excite
analysts and mobile experts who keep expecting the company to do something more
radical.
“We believe RIM has now squandered nearly every opportunity
and competitive advantage it enjoyed through ineffective R&D resource
management, delayed product launches and misreads of the competitive
environment,” Morgan Stanley analyst Ehud Gelblum wrote in a note to clients,
according to a
July 16 Reuters report.
RIM’s transition to a QNX-based smartphone operating system
also raises potential issues.
“QNX is a massive departure for RIM,” Peter Misek, an
analyst with Jefferies & Co., wrote in a June 17 research note. “QNX is a
UNIX, POSIX-certified OS that never has been deployed in this scale or way and
has not had to work with an infrastructure that is 1) RIM’s Java-based NOC and
node, BES, and BIS, and also 2) a spaghetti framework of UNIX, Linux, and other
carrier equipment OSs.”
Nokia’s Windows Phone devices won’t begin arriving before
the end of 2011, and so much depends on the company’s ability to transition to
the new platform from Symbian with relatively little audience attrition—a
potentially tall order, considering how steeply Symbian device sales have
fallen off.
“While we maintain our belief [that] the Nokia-Microsoft
partnership is best positioned to potentially create a third viable smartphone
ecosystem,” Canaccord Genuity analyst Michael Walkley wrote in a June 1
research note, “we are increasingly concerned about sales for Nokia’s Symbian
devices during the transition period.”
If anything, some analysts seem more upbeat about Nokia’s
long-term prospects. Research firm IDC recently estimated that Windows Phone,
boosted by Nokia’s worldwide reach, will overcome both Apple’s iOS and RIM’s
BlackBerry franchise to become, by 2015, the second-ranked smartphone platform after
Google Android.
In IDC’s estimation, Android will continue to dominate with
43.8 percent of the market, followed by Windows Phone with 20 percent, iOS with
16.9 percent, Research In Motion with 13.4 percent, undefined “Others” with 5.5
percent, and Nokia’s soon-to-be-defunct Symbian with 0.1 percent.
“Underpinning smartphone growth is the rapidly shifting
operating system landscape,” Ramon Llamas, an analyst with IDC, wrote in a
statement accompanying that breakdown. “End-users are becoming more
sophisticated about what kinds of experiences are offered by the different
operating systems. Taking this as their cue, operating system developers will
strive for more intuitive and seamless experiences, but will also look to
differentiate themselves along key features and characteristics.”
Whether IDC’s prediction comes to pass, it’s clear
that both Nokia and RIM are betting on the long-term, all the while hoping that
existing market share and consumer loyalty will carry them through several bad
quarters. Will these all-or-nothing bets pan out? Impossible to say—but until
those companies’ savior devices hit the market, you can bet their executives
are suffering some sleepless nights.
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