Research in Motion is Done if Blackberry Doesn’t Change

By James West
MidasLetter.com
June 17, 2011

I own both a Blackberry and an iPhone, and have done for almost a year now. I decided to try the iPhone after I inadvertently dropped my Blackberry 9800 into a sewer in Toronto one day. I’d always felt that the iPhone wouldn’t suit me because I was so addicted to the tactile buttons on the Blackberry that facilitated one-handed texting so well. But after a couple of months of getting used to tapping out messages on the screen, I was quickly converted to IPhone junky.

I still have my Blackberry 8900 hooked up to my South American phone number, but it will soon be replaced by an IPhone. And therein lies the essence of all Research in Motion’s (TSX:RIM, NASDAQ:RIMM) problems.

Its novelty is gone, and its interface appeal fell behind the iPhone’s irrevocably at some point in the last couple of years. Research in Motion will be bankrupt, in my opinion, within 2 years, unless it an pull a technological rabbit out of its hat soon. But I don’t see that happening.

The company made the mistake that all zero-to-hero firms make who ultimately become a flash-in-the-pan thanks to some momentary breakthrough that propels them to the top of their space. The mistake is becoming complacent, and believing that your place at the top is a forgone conclusion. Too often, CEO’s forget that being on top also means you’ve got the target on your back that everyone else is aiming for. The inability of co-CEO’s Jim Balsille and Mike Lazardis to recognize the gravity of the Apple threat is tantamount to just such complacency.

What they need is to realize is that the Blackberry was ahead of its time when it debuted in the 90’s, but now both its hand-held email and its proprietary messaging platforms are obsolete, as email is just a basic function of smartphones now, and texting has a much broader appeal than does a proprietary platform that other phone users cannot easily use.

To make matters worse, the recently released PlayBook is so obviously a pale imitation of the outstandingly successful IPad that it underscores Research in Motion’s rapidly declining relevance in the smart devices space.

Research in Motion has been under siege since Saudi Arabia, India and Indonesia said it would block Blackberry’s services unless they could monitor communications across the company’s networks in those countries. Blackberry has since reached a deal eventually that gave governments the access they wanted. But the negatives for Blackberry have continued since then.

Research in Motion’s recent share price performance and analyst downgrades mirror Nortel and Nokia, two other once high flying technology firms that will be sold for parts. RIM is a great short play now, and if the momentum to the downside in both its stock and its product development continue, its dead.

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James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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