Research in Motion: What Lies Ahead?
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Case Code: ECON039 Case Length: 13 Pages Period: 2012 Pub Date: 2013 Teaching Note: Available |
Price: Rs.300 Organization : Research in Motion Industry : Smartphones Countries : North America; Global Themes: Market Structure, Turnaround Management |
Abstract Case Intro 1 Excerpts
Excerpts
Background Note
RIM was founded in 1984 by two engineering students Mike Lazaridis and Douglas Fregin (Douglas). RIM started out as an electronics and computer science consulting business. It later started to focus on transmission of wireless data and setting up of wireless point-of-sale terminals for business communications like credit-card sales processing. RIM was the first company outside Scandinavia and in North America to develop connectivity products. By 1992, it started to focus on pagers when Jim Balsillie joined it by putting in Canadian Dollars (C$) 250,000 of his own money. Its research staff found a way to both receive and send messages on pagers.
Mike was interested in developing a system to send and receive not just plain text messages but emails over wireless networks. In 1996, RIM introduced the first two-way messaging pager, the 'Inter@ctive Pager' and the ‘RIM 900 OEM Radio Modem’. RIM was listed on the Toronto Stock Exchange in 1997 and raised C$ 115 million from investors.
By the late 1990s, phones capable of doing much more than just voice calls began to emerge. In 1996, Nokia Corporation (Nokia) introduced its ground breaking product called the Nokia 9000 communicator which was capable of sending emails and Fax messages. The Nokia 9000 was an instant hit among busy corporate executives. It was later followed up with the more advanced Nokia 9110 Communicator. RIM responded by releasing a new wireless device called the BlackBerry 850 under the new BlackBerry brand in 1999. The BlackBerry 850 was a handheld computer which offered two-way paging, email access, and other wireless data access with a small onboard QWERTY keyboard. RIM signed agreements with a number of wireless service providers to offer the BlackBerry services on their networks. The new BlackBerry devices were received well by corporate users due to their anywhere secure email access facility. With the introduction of the BlackBerry range of devices, RIM emerged as one of the fastest growing technology companies in Canada. RIM was listed on the NASDAQ Stock Market in 1999 and raised C$ 250 million to develop the BlackBerry technology. In November 2000, RIM raised another C$ 950 million through a share offering...
New Problems
RIM’s drastic decline in performance was due to a number of factors. It lost market share globally and most importantly in the most profitable US market. The share of RIM’s BlackBerry devices in the US smartphone market declined from 24 percent in November 2010 to just 9 percent in November 2011. This was a big fall for BlackBerry which had once been the top smartphone seller in the US market. RIM’s global market share too declined from 16 percent in 2010 to 10.4 percent in 2011. The company’s share price also fell by nearly 77 percent between December 2010 and December 2011. One of the main reasons cited by analysts for RIM’s declining performance was the increased competition in the market for smartphones...
Playbook Fiasco
After the release and instant success of Apple’s iPad in April, 2010, a new market was created for touch enabled tablet computers. Tablet computers offered features similar to that of smartphones but with bigger screen sizes, enhanced battery life, and higher processing speeds. RIM developed a new tablet computer called the PlayBook in response to the highly successful iPad (iPad) from Apple. The PlayBook was a touch-enabled tablet computer targeted at professionals who had beeen using BlackBerry smartphones till then. Unlike other tablet computers like iPad, the PlayBook offered access to corporate mail, calendar, and memos with the same level of security available on a BlackBerry smartphone. The PlayBook was initially released in Canada and the US on April 19, 2011, and was released globally later. It had many features which were on a par with those on the iPad...
Leadership Gap
In December 2011, RIM announced that the new version of its operating system for its smartphones, BBOS 10 based on QNX would be delayed till the second half of 2012. This announcement led to a further fall in its share price by 7 percent and fueled shareholders’ anger (Refer to Exhibit- III for the graph of RIM’s share price from January 1st, 2008 to February 21st, 2012). Doubts began to surface on the ability of the BBOS 10 to compete against iOS and Android. RIM’s continued dismal performance led to some analysts predicting that it had already lost the game to its competitors. They said that it might be too late for RIM to change course and face the competition...
Outlook
Meanwhile, RIM’s stock price fell further and hit an all-time low of US$ 15.02 in February 2012 (Refer to Exhibit-III for the graph of RIM’s share price from January 1, 2008, to February 21, 2012). However, even though the sales of BlackBerry smartphones were plummeting, RIM continued to expand its subscriber base. But analysts wondered whether RIM’s existing subscribers would stay on with the company till it released better smartphones. Commenting on the sales of RIM, Tavis McCourt, an analyst at Morgan Keegan , said, “They’re still adding a lot of subscribers, but they’re not selling enough phones...
Exhibits
Exhibit I: Features of BlackBerry PlayBook
Exhibit II: Preference for Different Operating Systems for Tablet Computer by CIOs (Responses in Percentages)
Exhibit III: Graph of Research in Motion’s Share Price from January 1st, 2008 to February 21st 2012
Exhibit IV: Market Shares of Major Mobile Operating Systems (January and December 2011)
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