RIM’s Future: Dead, Alive, Reborn?

Much has been written about RIM’s gloomy quarterly numbers, most of it sensible (with one brain flatulence exception). The attention is a testament—an apt word—to the place RIM once occupied. From its humble pager origins, the BlackBerry, rightly nicknamed CrackBerry, became the de rigueur device of enterprise users. Like most former BlackBerry fans, I have my own fond memories of its world-class mail/contacts/calendar PIM service and of the impeccable OTA (Over The Air) synchronization that freed my wife from her Palm USB cable and HotSync travails.

As always, Horace Dediu digests the numbers for us, adds insight, and comes up with a somber conclusion (emphasis added):

The selection of tools for workers by a group that claims to understand their needs better than they do is an archaic concept.
This was true even in 2005 when RIM began targeting consumers. It was then that they saw the writing on the wall–that their enterprise business was being commoditized. All of RIM’s growth since has been in consumer segments. By abandoning that trajectory RIM is effectively giving up on growth. And giving up on growth is simply giving up.

For the first time in seven years, RIM lost money, $125M; revenue is down 25% from a year ago; unit volume decreased by 11% from the previous quarter. The only somewhat positive sign is that cash increased by $610M leaving RIM with $2.1B in its coffers, a fact preeminently featured in their press release. The message is clear: Look, we’ve got plenty of cash to last us until “late 2012” when we’ll be back with new BB10-powered smartphones.

This is a dubious proposition.

RIM will undoubtedly undergo another two or three quarters of marketshare erosion and losses. Last quarter’s combination of positive cash flow in spite of losses can’t be repeated indefinitely, there’s only so much inventory you can liquidate—at a loss—before you see the bottom of the cash register.

This isn’t to say that Thorsten Heins, RIM’s new CEO, isn’t making an effort, starting with housecleaning: Much to everyone’s relief, former co-CEO Jim Balsillie is “severing all ties with the BlackBerry maker” after a brief stay on the Board when dethroned in January. Jim Rowan, the former co-COO (Heins was the other half before becoming CEO), is also leaving RIM. More significantly, software CTO David Yach is sailing away after 13 years at the helm. Nobody accused RIM of making poor quality hardware, it’s the outmoded and late software that fell the smartphone leader.

For too long, RIM execs (and not just David Yach) didn’t heed the software threat from Google and Apple, they thought their enterprise franchise was impregnable. But by 2010, reality could no longer be ignored; RIM panicked and looked for an OS to replace their aging software engine. They found QNX, a UNIX-like system hatched at the University of Waterloo next door and used by its then-owner, Harman International, for real-time audio and infotainment embedded applications. Dating from the early eighties, QNX is mature and well-tested — but no more adept as a smartphone OS than a vanilla Linux distro. Certainly, you’ll find Linux code at the bottom of the Android stack, but what makes Android successful are its thick, rich layer of frameworks that are indispensable to application developers.

When RIM bought QNX from Harman, the OS offered little or nothing of such vital smartphone app frameworks. David Yach’s team had to build them from the ground up (or, perhaps, adapt some from the Open Source world). This doesn’t happen quickly—ask Google why they acquired Android, or look at Apple’s years of stealth iOS development based on its own OS X. The difficulty in engineering a fully-functional foundation on which to build competitive apps explains why RIM’s “Amateur Hour Is Over” PlayBook tablet lacked a native email client when it was released last spring. And this is why the new BB10 phones are slated for ‘‘late 2012”. By that time, Samsung and Apple will have newer software and hardware—and an even larger market share.

The trouble for RIM is simply stated: Too little too late, while the money runs out. If only the cure were as easily put.

We won’t dwell on the contrast between what Heins said in his first press conference as CEO in January (“Stay the Course”) and the changes he now claims are necessary. He has had time to assess the situation and has declared “We Can’t Be All Things To All People”, by which he means abandoning consumer-oriented multimedia initiatives, a retreat Horace Dediu equates to a wholesale giving up on growth, to becoming hopeless.

For my part, I can’t help but wonder: What did Thorsten Heins see, say, and do since he joined RIM in 2007, right when the Jesus Phone came out? At the time, as his bio points out, he was Senior VP of the BlackBerry Handheld Business unit…

Today, RIM’s new CEO isn’t looking away. In public statements last week, he made it clear that all options are on the table. We can ignore the possibility that RIM might find licensees for its OS (what OS?). This leaves RIM with a single option: Sell the company…but to whom? Asus, Samsung, HTC? Why not ZTE and Huawei while we’re at it? None of this makes sense, these are not necrophiliac companies, they’re happily riding Android.

Disregard the talk of buying RIM for its alleged patent portfolio. This is the company that, after years of fight, had to pay NTP more than $600M, and Visto more than $260M in patent settlements. In any event, as the Nortel example shows, one can buy patents without getting saddled with the company.

Of course, there is one intriguing possibility left: Microsoft could do to RIM what it did to Nokia. They could convince RIM to abandon its unlikely-to-succeed “native” software effort and become the second prong in Microsoft’s effort to regain significance in the smartphone wars. We can picture the headlines: RIM Joins Nokia in Adopting Windows Phone, Microsoft Now Firmly Back in the Race…

We’ll soon know if Microsoft, after toying a few times with a RIM acquisition, now finds a more realistic management team and Board sitting across from them at the negotiating table.

The Nexus One Puzzle

Let me state it at the outset: I understand the buzz generated by the Google Phone a.k.a Nexus One. But, the more I look into details and their ramifications, the more I’m puzzled. What exactly is Google trying to do? Make Android, their smartphone OS platform the “Windows” of the new era of really personal computers? Or become a dominant handset player to effectively compete with RIM’s Blackberries or Apple’s iPhones? Or, third possibility, dominate the new world of mobile advertising as it does the “old” universe of Web ads for PCs?

Let’s start with the product.

It’s not really a Google Phone. Its real name is Nexus One and it’s made by HTC, the well-regarded Taiwanese handset maker that produced the first G1 and G2 Android phones — as well as their Sidekick ancestor from Danger. Microsoft bought that company but the CEO, Andy Rubin joined Google as head of the Android team.
But, you’ll object, most cell phones and smartphones are made by one company, a manufacturing subcontractor and branded and sold by another. Apple doesn’t make its iPhones, nor does RIM make any of its Blackberries, to use but two well-known examples. Indeed, the Nexus One is sold by Google at If you already have a Google Checkout account, the purchase process can’t be simpler.

The “Love Triangle”: Apple, Google and Verizon

At the end of my August 9th Monday Note, “War in the Valley, Apple vs. Google”, I committed to get into Google’s potential weaknesses in this conflict. Since then, things have gotten a tad more complicated.

The enemy of my enemy is my friend.

As discussed last August, Eric Schmidt, Google’s CEO, had to leave Apple’s Board of Directors because, even for a Valley used to “coopetition”, the conflict of interest became really blatant.

Both companies make operating systems for smartphones, the new wave of personal computing. There, we have Android vs. iPhone OS. For the desktop, it’s Chrome OS vs. OS X. Yes, for the desktop: Chrome OS purports to be a Cloud-oriented netbook OS but, as explained in the same August 9th MN, Chrome smuggles very substantial desktop code under the cover of “mere” browser plug-ins, this to let Chrome OS stay useful in the absence of a Net connection. Picasa competes with iPhoto, Chrome, the browser, not the OS, competes with Safari. In July, Apple bought PlaceBase, a mapping company, whose Web site is now reduced to a set of API (Applications Programming Interface) documents, very likely to gain independence from Google Maps.
The more we dig, the more we find places where both companies want to pick the same pockets. If you think about it some more, both companies behave as if they’d want all your attention and all your money. Still ruminating, could it be both companies no longer take Microsoft seriously and, having lost a common enemy must now be at each other’s throat?

Then, we have Verizon and Apple. The “love” between these two has been hot since or, actually, before the very beginning of the iPhone. A few weeks before the inaugural June 30th, 2007 shipment of the JesusPhone, Verizon incautiously circulated the now semi-famous “iWhatever” memo to its troops, dissing the iPhone and its maker. 50 million (we’ll see the latest numbers in about 10 days) iPhones and iPod Touch(es) later, Verizon is more than ever dead set against letting Dear Leader have its way with its business model. To Verizon, AT&T’s fate is anathema: AT&T let Apple “run the table” for digital media sales over its wireless network. Put more crudely, AT&T bent over and became a “dumb pipe”, a wireless ISP in the service of the iTunes content distribution and revenue engine. For this unnatural act, AT&T got a $100 ARPU (Average Revenue Per User, the industry-wide average is about $50) and the use of the iPhone as a lure to steal Verizon subscribers. Verizon can’t stand that thought, they want to keep their birthright, that is a piece of every bit of digital content revenue moving through its network. More

Processors: More, yes, but better?

Last week’s Intel Developers’ Forum brought the expected crop of new CPU chips. The simplest way to summarize what’s taking place is this:

  • We’re stuck at 3GHz, so we add more processors on the CPU chip.
  • Intel continues to lead with small “geometries”, 32 nanometers today, 22 nm tomorrow.
  • The company pitches its x-86 processors for mobile devices.

More processors: Once upon a time, each year brought a significant increase in processor speed. Not to be too wistful about the early PC days, but a 1 MHz processor ran “perfectly good” spreadsheets. Like many bouts of nostalgia, this one omits important bits of context such as the complexity of said VisiCalc model, what other software ran concurrently, if any, what storage and networking devices were supported, what kind of display and audio devices were offered. Still, I’d love to see the original assembly language version of Lotus 1-2-3 run on a “bare metal” DOS configuration brought up on a 3GHz Intel machine — a CPU clock 3,000 times faster than the 1983 vintage machine.

In the early 90’s, luxury was a 33MHz Pentium. Now we’re at 3GHz, apparently stuck there  for the last 4-5 years. (A history of Intel processors can be found here.).
The faster you move something around, the more power you need. Try lifting and lowering a 10 pound weight. Slowly at first, once every 5 seconds, then every second, then twice per second. Your own body temperature will give you the answer.
Inside a processor, we have transistors. These are logic gates, they open and close. In doing so, they shuttle electrons back and forth at the circuit’s clock speed. These electrons are not “weightless”, moving them consumes power, just as we do lifting weight. As the clock rate increases, more power is needed, the transistor temperature increases. There are more precise, more technical ways of expressing this; but the basic fact remains: faster chips are hotter chips. Knowing this, chip designers found ways to counter the temperature rise such as using smaller gates shuttling a smaller “mass of electrons” back and forth. Air or liquid cooling of chips does help as well. Still, we hit a wall. With today’s (and tomorrow’s foreseeable) silicon technology, we’re out of GHz.
So, what do we do for more powerful CPU chips? More

Time to think seriously about the iPhone

4:00am. I find myself reading an interesting story covering Portfolio’s web site – on my iPhone. As sleep comes back, I reflexively reach for the “save” (for later reading) button that is on every iPhone news application. But I am reading from the magazine’s site, as opposed to running an app on my smartphone; web sites don’t have a save button. I just became aware of a new set of habits, barely conscious and now ingrained thoughts/actions created by reading news stories on an iPhone (or an iPod Touch). A good sign.

In the Monday Note, for quite a while, Jean-Louis and I have been discussing the development of news-related iPhone apps (our first story “Why Publishers should grab the iPhone” goes back to a year ago,
or follow the iPhone tag on the Note). Since then, several news organizations have developed specific applications (not just tailored websites) for the iPhone. More

eBooks and Smartphones

Update: see a presentation of the Kindle2 here.

Another look at an old, but not aging, topic: eBooks. There is visible agitation ahead of Amazon’s expected announcement, probably as you read this note Monday February 9th.  Jeff Bezos is set to announce a new version of the Kindle eBook reader, let’s call it Kindle 2.0. [Since I first drafted this column, bloggers obliged with more details.  February 9th announcement, ships Feb 24th, price $359 (?!).  See here]. By “coincidence”, Google announces a neat eBook reader Web application (as opposed to a native one, to code running on the device) for Android and iPhone.  See it here, it’s almost perfect on the iPhone, with an option to place a neat dedicated icon on the Home screen.  I write almost perfect because, unlike Google Reader, another Google Web app, the top of the book reading app screen seems to be fighting with the always present top of the iPhone screen. FINR (Fixed In Next Revision). More

Reading from a smartphone, the smart way

I’m quite fond of Bloomberg’s iPhone application. My insomnia companion is my iPod touch, used as an alarm clock, and as a convenient bedtime newsreader. And the Bloomberg app is my favorite: good navigation, a simple bottom toolbar (News, Markets, MyStocks, StockFinder). In the News section, stories are shown as they are published and each time I open a page a banner briefly pops-up inviting me to go (or not to go, which is good) to the advertiser’s site. Articles are excellent as always, stocks charts — although depressing for those who owns any — are great, with pinch-zoom when looked in landscape mode. For a demo, you can go to this video,  or, better, download the app for free on iTunes Appstore.
Fine, but the Bloomberg app is still version 1.0. More

The end of Motorola?

Once upon a time, Motorola was the king of cell phones. AT&T invented the cellular network, Motorola, already a leader in radio technology, designed the mobile devices and, in 1983, introduces the Dyna-Tac, the first of a long line of clearly superior products, all ending in Tac.  In the late eighties and nineties, MicroTacs and StarTacs were musts for Silicon Valley geeks and MBAs alike.  Motorola’s prowess was, in fact, much wider, ranging from NASA communication equipment to microprocessors (6800, 68000 and PowerPC families) and networking equipment.  The company even made yet another name for itself by inventing the Six Sigma quality improvement processes.  Motorola was a widely admired electronics giant.  Was. More

Android: First Impressions

Let’s forget, for a moment, the sublime irony at the end of the W years, the right-wing neocons’ parting gift: a socialistic, state-owned financial system. Too depressing.
Instead, let’s take a first look at Android, the latest entry in the most dynamic segment of the high-tech industry, smartphones.  (The nice folks at T-Mobile will immediately object, it’s their phone not Google’s, but tell that to users, it’s Android, it’s the Google phone.) More

Android Week

Something to keep our mind off the Wall Street catastrophe. Who knows, we might be on the verge of a “nuclear winter” as the Bush administration wakes up to another consequence of its intellectual shallowness, of its inability to understand that for markets to be really free they need to be regulated with an effective, uncorrupted police to enforce regulations.
So, turning to saner pursuits, this coming Tuesday September 23rd, T-Mobile is slated to announce their first Android phone. What does this mean, how will this impact the smartphone market and the cellular carriers?

Android is the name of the Open Source smartphone OS developed by Google’s engineers. What we think T-Mobile will introduce is a set built by HTC, running the Android OS and applications.  In advance of the launch, T-Mobile appears to be upgrading its network, or parts of it, to 3G connectivity.  In addition, T-Mobile plans an on-line store for Android applications, the rumor being it won’t impose the kind of restrictions Apple is known for.  In other words, T-Mobile welcomes Android developers with open arms.  Predictably, prices, handset and service, will be iPhone-like.  What appears to be not at all iPhone-like is a slide-out keyboard to be used with the screen in landscape mode.
If all of the above is close enough to the upcoming facts, this will add a considerable amount of energy to the already lively smartphone market. Many, yours truly included, are happy to see more competition for the iPhone and his imperious maker.  As I was documenting my iPhone’s numerous crashes, one Apple individual expressed happiness: There was only one “real” OS crash, you see, the rest being processed “killed because they started to use up too much memory.” It’s a relief to know my rudely interrupted Safari browser connections or Maps searches are not real crashes.
But, more competition is a vague phrase. Nokia has been around a long time, Windows Mobile is about 10 years old, RIM (Blackberry) too, to say nothing of Palm, Sony Ericsson and Motorola.  The iPhone has had competition for more than a year, what changes now?
Not the operator situation.  T-Mobile is a good company, with good customer service, they’re part of the big Deutsche Telekom konzern, arguably smaller but more solid than Sprint.  Curiously, neither Verizon nor AT&T, nor Sprint appear to be interested in Android.  Is it because they fear Google will have too much power on them because of the openness of the platform, because it could lead to Android VoIP applications bypassing their network billing system?  T-Mobile, in a challenger position, has no such fear.  On Blackberries, they offer what is known as WiFi Mobile Calling, that is VoIP over WiFi at home or at the office.  In other words, carriers don’t like Google pushing them towards their pre-ordained destiny: becoming wireless ISP.  Verizon talks the Open (that word again) Network talk but doesn’t really walk the walk, that is allowing anyone to bring their handset to their network.  They and Motorola got sued, and had to settle, for removing Bluetooth features allowing too much data exchange between a laptop and a phone.  Such exchange was bad: it reduced billable network traffic.  A bigger threat to the iPhone would be Verizon embracing the Android platform.
What about the product itself?  I’ll get one as soon as possible, I already have a T-Mobile subscription. I suspect the keyboard-based UI will be well received and I’m sure we’ll see good applications on the handset, if only native Google apps, games and utilities.  The technophile is excited, and so is the venture capitalist as Android will help more applications developers make more money, resulting in new opportunities to finance interesting companies.
And there is Google. Not the Android team, some members are ex-accomplices of mine, I admire what they do, but Google the search and advertising and Cloud Computing company.  Will Google help the still very timid smartphone advertising market?  Will a better keyboard enable more mobile applications?  For example, even as a long-time Blackberry user, I would not write this column on it.  And I won’t do it on my iPhone either.  But, will I use Google Docs on the T-Mobile handset because of its (rumored) horizontal keyboard?
Moving to content, will the T-Mobile Android phone run all YouTube videos, will it run a version of Flash?  The iPhone doesn’t, a topic of muddled technical and industry politics debate, Apple and Adobe aren’t working too well together of late.
Still on content, imagine this: Google makes a deal with Amazon and all the Kindle content becomes available on Android phones.  Or, not at first but in a future iteration, the video downloads Amazon sells become available on Android.  And why not start sooner with the music (MP3) files Amazon sells.
You see why I’m curious.  I’m lucky, the T-Mobile office in Palo Alto is about 100 yards away from my office.  –JLG