Research in Motion (Nasdaq: RIMM) is in trouble again, as shown by its lowered 2011 earnings forecast.
BlackBerry shipment volumes are down, too, as is the average selling price. And RIMM has also had to delay new product launches until later this year while it develops touchscreen models and tries to shift to a new operating system.
The company continues to struggle to retain its portion of the ultra-competitive smartphone market. According to research firm Canalys, RIMM’s global share slipped to 14 percent in the fourth quarter, down from 20 percent a year earlier.
Worse yet, the industry forecasts that its hold will slip to 11 percent by 2015. Analysts even expect Microsoft (Nasdaq: MSFT), with itsrecentNokia (NYSE: NOK) deal, to outpace RIMM.
Many want to write off the BlackBerry creator as a non-competitor altogether. And they have some reason to do so, considering how Apple (Nasdaq: AAPL) iPhones and Google (Nasdaq: GOOG) Android-operated phones keep scoring big with consumers.
The latter could even hold up to half of the global smartphone market by 2015.
RIMM’s Secret Weapon: BBM
But RIMM does have one last hope of retaining a decent percentage of the smartphone market in BBM, or BlackBerry Messenger…
Many young people around the globe aged 15 through 24 are buying BlackBerry phones in great numbers for a single feature: BBM, the instant messaging application available only on RIMM devices.
Similar to SMS text messaging, it runs faster. And it’s free, as opposed to extra data packages.
Over 39 million people use it worldwide, though it hasn’t taken off yet in the United States. BBM is extremely popular, however, in
* The U.K.
* Netherlands
* Brazil
* Indonesia
* South Africa
* The Middle East
In the past year alone, usage has risen 500 percent, making it a real threat to phone companies’ text-messaging revenue in certain markets. In fact, consultancy firm Mobile Youth expects SMS volumes to drop by 20 percent in the next two years in countries like the U.K.
RIMM’s management team didn’t even realize the program’s potential at first, which doesn’t say much for them. Graham Brown, managing director at Mobile Youth, said BBM took off “before RIMM saw it on their radar.”
Could Blackberry Messenger Change RIMM’s Outlook?
The growth of BlackBerry Messenger could signal a significant step for RIMM. It’s the reason why business users no longer make up the majority of BlackBerry users.
What Research in Motion now needs is for youths’ enthusiasm for BBM to spread to their parents. If that happens, the company believes it can retain its market share.
To capitalize on that potential, RIMM now provides “gifting” capabilities in BBM. This allows users to send each other talk-time vouchers, and virtual items such as music tracks should soon follow.
The company is also opening up BBM to third-party developers. Doing so allows it to build other services on top of – or incorporate into – its messaging system.
This could open it up to ads and marketers next, leading to increased revenue. Rumors even suggest that RIMM might open up BBM to other mobile platforms, through iPhone or Android applications.
But BBM’s “social platform” is still in beta testing mode. And management remains cautious.
This case of largely unnecessary nerves says something about how the company runs. RIMM finally has a worthwhile weapon against Apple and others… yet it hesitates to fully unleash it.
The company should be pushing BBM every chance it gets, particularly in the United States.
Good investing,
Tony D’Altorio
www.investmentu.com
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