For the past year, we’ve been arguing that Research In Motion (RIMM) is in trouble.The smartphone leader is rapidly losing share to Apple and Google in the consumer market, which is where most of RIM’s growth comes from. Worse, the iPhone and Android have also recently begun making inroads in RIM’s core market–the enterprise.
Put those trends together, and RIM looks like the next Palm–a one-time smartphone leader who lost a step in the innovation game and was quickly rendered irrelevant (with predictable effects on the stock price).
We think that eventually Microsoft will buy RIM as a way of shoring up its own demolished mobile business, and the two companies’ strength in the enterprise market would certainly complement each other. But the trends that are driving iPhone and Android into the corporate market are also rapidly blurring the line between “consumer” and “enterprise.”
Even normally optimistic Wall Street has begun to throw in the towel on RIM. The latest analyst to do so, Bernstein’s Pierre Ferragu, cites several important factors:
- The large enterprise market is saturated (i.e., no growth there)
- The small-and-medium-sized enterprise market is more open to competition, and there is limited room for growth. Also, average selling prices will decline.
- Companies are increasingly opening up and allowing employees to use the smartphone of their choice–and, increasingly, those smartphones are iPhones and Android phones. This has two benefits: It makes the employees happy AND it saves the companies money.
Here are some quotes from Ferragu, via John Paczkowski at All Things D:
“The market for corporate mobile e-mail is highly penetrated and saturated outside of SMEs (Small and Medium Enterprises)… Growth in the number of companies using mobile e-mail will be limited to the SME market, in which RIM is likely to suffer the most from competition. If there is still some growth in the number of users at companies already using mobile email, it is limited and we suspect it will turn into negligible value growth as it will go along with significant ASP decline.”
“… Despite the company’s overall dominance of the [enterprise] segment … 74 per cent of companies with mobile e-mail have already adopted alternative platforms, including the iPhone and Android,” Ferragu explains. This phenomenon is very new: almost all these companies “opened-up” their systems in the last two years, half of them in the last 12 months. We expect these companies to progressively ramp up the installed based of non-Blackberry solutions and therefore expect increased pressure on RIM’s performance.”
“Enterprise satisfaction with RIM solutions is very high, and most managers surveyed said that they expected BlackBerry products to remain innovative and competitively featured… The issue boils down to cost and consumer preferences: employees want to be able to use their own phone, and allowing them to do so presents IT & Telecom managers with a way to substantially cut their operating costs.”
So what can RIM do to stop the decline? Not much, says Ferragu. It missed a step, and now the competition has blown right past.
Time for RIM to sell while it still can.