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In just over a decade RIM has gone from being revolutionary to having an ‘aging product line’ as recently cited by co-CEO Jim Balisillie.

RIM has failed to keep up to market changes and primary competitors Apple and Google.  What happened?  How did RIM go from being way ahead of the curve to trying to catch-up?

MARKET CONFIDENCE

RIM reported its first quarter earnings last Friday.  By close of business Friday the stock price had dropped 21.5%; by Monday it fell another 6.7%.  The stock is trading now close to $28 with a $14.4B market cap.  Just a few years ago RIM’s shares were trading above $140 with an $80B+ market cap.

It’s evident that confidence in the company is dropping.

THREE BIG QUESTIONS

There are 3 big questions about RIM’s ability to turn things around.

  1. Can RIM be a GAME CHANGER again & again & again?
  2. Can RIM change its DIRECTION?
  3. Can RIM improve its IMAGE?

RIM and Apple are both game changers.  But RIM only changed the game once.  Apple has changed the game fast and often.

RIM first released its Blackberry in 1999.  It was a game changer.  The engineering behind the product was lauded.  The battery life, physical QWERTY keyboard and email capabilities were stellar.  Since then, with the exception of the April 2011 Playbook release, there hasn’t been any significant innovation.

In comparison, since releasing its first iPOD in Nov 2001, Apple hasn’t stopped innovating & changing the game.  The yearly iPOD upgrade releases, the launch of iTunes in 2003 and the rolling out of new hardware products has continued year after year.  The Mini was released in 04, then the Shuffle in 05, and the Nano 08.  The next big game changer was the iPhone 07.  With the iPhone Apple not only defined the smart phone space but also become a leading market player in this space.   Its release of the App store in July 08 also assisted in this regard.  In April 2010 Apple changed the game again with its iPAD release.  By March 2011, less than 12 months later it had released version 2 of the iPAD.  RIM had yet to release its Playbook.

KEY LESSON: Innovate often & fast to grow your user/customer base and market share.

RIM owns 25.7% of the smart phone space.  Apple only a smidgen more at 26% & Google’s Android has a 36% market share.  These numbers all seem strong yet RIM’s stock is extremely devalued especially in comparison with Apple’s and Google’s.

The difference is the direction of each of these companies’ trajectory.  RIM’s market share is dropping, Apple and Google’s market share is growing.  Google didn’t even enter the mobile telephony space until 09 but had a 33% market share less than a year later.

Growth rates, market share, earnings and EPS should be positive and/or increasing over time.

KEY LESSON: The metric itself isn’t as important as the direction you’re going & how fast you’re getting there.

RIM’s image is taking a beating.  Delayed product launches, despondency to changing market conditions and a lack of innovation have had a negative impact on RIM’s image.  There are growing concerns about RIM’s ability to compete with the likes of Apple and Google.  Public confidence in the company is waning and it’s reflected in a diving share price and loss in brand equity.

In a published report in May 2011 by Millward Brown, Global Brands Agency, RIM had lost 20% of its brand value over the year.  The same report valued Apple as the #1 brand in the world overtaking the previous 4 year running victor, Google.  Apple’s brand is valued to be at half of its $153B market capitalization.

KEY LESSON: Image is affected by a company’s response to market conditions, its performance and its positioning.  Image affects brand value and market capitalization.

  1. Can RIM be a GAME CHANGER again & again & again?
  2. Can RIM change its DIRECTION?
  3. Can RIM improve its IMAGE?

SUMMARY

As a technology company the market necessitates a faster rate of change.  Consequently, the negative impact to valuation by a lack of innovation, declining growth rate and loss in brand value is especially pronounced.  But the relationship between growth rate, innovation, brand equity and valuation is important in any market space.

I still remember my first Blackberry, way back in ’99.  I still own one, but I’m part of a shrinking group.  I’m hoping that RIM can change the game, change direction, and change its image.

In ’99 RIM was a way ahead of the game, since then it’s like RIM just stopped playing.

 

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