BlackBerry's Bizarre Pivot

Today CEO Thom Heins dropped a doozy: The faltering device maker's new operating system, BB10, could be licensed to third parties such as Samsung and Sony.

Research in Motion, maker of John McCain-approved BlackBerry smartphones and tablets, has suffered a tough couple of years: management changes, plummeting revenues, product delays, thousands of employee layoffs, and nose diving market share. But the Canadian company could soon adopt a radically new strategy in hopes of slowing its diminishing hold on the mobile market.

Today CEO Thom Heins dropped a doozy: The faltering device maker's new operating system, BB10, could be licensed to third parties such as Samsung and Sony. Such a change would represent a risky reversal for RIM, which has long controlled the software it develops and the hardware it runs on. But with Apple and Google continuing to chomp away at its market share--not to mention that BB10 has been delayed until 2013--perhaps RIM has no choice other than to explore this new approach, even as its chief competitors seem to be heading in the opposite direction.

“We don’t have the economy of scale to compete against the guys who crank out 60 handsets a year," Heins said in interview with the Telegraph. "To deliver BB10 we may need to look at licensing it to someone who can do this at a way better cost proposition than I can do it.”

Licensing software to third-party hardware makers is a strategy many companies have adopted--Microsoft and Google perfected the licensing approach for PCs and smartphones, respectively. But as OEMs continue to take less innovative approaches to designing hardware due to declining margins, software companies are beginning to lean into the hardware space. Google recently acquired Motorola Mobility for $12.5 billion; in June, Steve Ballmer unveiled the Microsoft-manufactured Surface tablet, and the company also acquired Perceptive Pixel, a maker of multitouch displays.

Both moves signal the tech giants are moving into Apple territory. Cupertino has always been committed to controlling the stack--that is, designing software and hardware together. The result has been an unprecedented streak of innovation and market dominance: iPods, iPhones, iPads.

Heins' comments today signal RIM may be finally giving up on that strategy, and possibly sacrificing its one Apple-like advantage: designing hardware and software together. Arguably, however, the strategy has not worked out for RIM in recent years: RIM's revenue declined 42% last quarter; some analysts believe its market share could fall well into the single digits; and even its much ballyhooed PlayBook tablet barely made a chip in the consumer and enterprise markets. So perhaps it would have better luck relying on third parties like Samsung, which has produced well-received devices for Google, such as the Galaxy S III.

But there's another upside to taking on this new approach. As third-party hardware makers--such as HTC, Nokia, Sony--are increasingly put in the uncomfortable position of having to compete with the same companies they license software from, they could be looking for an agnostic software maker to alleviate concerns. As Microsoft acknowledged in a recent SEC filing, "Our Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform."

Could RIM emerge as that alternative to Windows and Android in the mobile space? Calling it a long shot would be an understatement. But given Heins' statements and recent reports that RIM could be looking to split off from its hardware unit, let's not put it outside the realm of possibility, however slight it is.

[Image: Flickr user Sippanont Samchai]

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3 Comments

  • Linda Bernardi

    In ProVoke (
    http://www.lindabernardi.com/p..., I remind people firstly that I was a super avid fan of BB for over a decade and everyday I yearn the speed and efficiency I had with the BB, when I work with my iPhone. At the same time, RIM will remain as one of the most historic cases of how a company can fall behind by not being able to disrupt and innovate and assume that they are ahead of the game! A sad case rivals by the likes of Kodak and Nokia!   The move to farm out BB10, BB’s o/s, not only makes no sense, it is a desperate and poorly thought out strategy of ‘sort-of’ remaining relevant. As this article points out, not sure what the strategy is here, but one wonders if there is one! I can see some license revenues, but seriously RIM: This is the best you could do? Prime example of a company missing the boat, not wanting to invest to innovate and now desperate measures while the company is tanking… very sad to see this happen to RIM.

  • Charles Knight

    This article falls to pieces because it's based on half a quote - go back and read the full interview and put into context. Hint: Heins wasn't talking about walking away from hardware but a very specific situation. 

  • Paul Gray

    RIM has inept managment in positions that make there furture unatainable.  There new OS is not ready and is not progressed along enough for the time-scales involved. 

     I wonder if they even know what coffee smells like anymore.