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Could a BBM app save the BlackBerry?

Smartphone maker Research in Motion saw 7% wiped off its value after the departure of CEOs Mike Lazaridis and Jim Balsillie – but there’s juice in the BlackBerry yet

When Mike Lazaridis and Jim Balsillie stepped down as joint chief executives at BlackBerry maker Research in Motion (RIM) last week, it was a reminder that in a world where names like Myspace flash in and out of the limelight, completing decades of traditional company lifecycle in a few years, today’s technology giants can quickly become tomorrow’s also-rans.

Social media aside, nowhere has the pace of change accelerated so much as in mobile. In 2003, the Canadian company evolved its two-way pagers into the world’s first successful smartphone. Email, texting and calling were now all possible on one gadget.

Designed for businesspeople, the BlackBerry crossed over to become a consumer status symbol, sported by celebrities such as Victoria Beckham to Paris Hilton. By 2009, RIM was valued on the stock market at m (£50bn).

BlackBerry had the market to itself for four years, and then along came the iPhone. In 2007, Apple put the internet into its customers’ pockets, and opened computing’s new frontier.

Others rushed in. The first commercially available phone to run Google’s Android operating system was released in October 2008. Two years later, Android was outselling Apple in the US. Handset maker Samsung launched its first Android phone in 2009. By the end of 2011, the South Korean company was the biggest seller of smartphones worldwide.

Nokia was the first to suffer. Four years ago, the Finnish company controlled 62% of the smartphone market in western Europe. But its Symbian software was never on a par with Google’s or Apple’s. Nokia is now the fifth-largest player in Europe, with 9% by the third quarter of 2011, according to research firm IDC.

“The last three years have taught most of these companies that they cannot rely on their market share, because the market moves very fast, and from one day to the other they can lose everything,” says analyst Francisco Jeronimo at IDC. “If they ignore the trends they can go from number one to zero.”

Nokia has set out a credible path to recovery, replacing Symbian with Microsoft’s more agile Windows Phone software. Last week, chief executive Stephen Elop forecast a return to break-even by March, reversing a €954m loss in the fourth quarter of 2011.

While Nokia has responded quickly, RIM’s reaction has been the corporate equivalent of covering your ears and singing. Until quite recently, founder Lazaridis was of the view that touch-screen phones would never take off with business users. Eventually, RIM realised it was time to change operating systems. Its first touch-screen phones running on the new QNX software were due this quarter. They have now been postponed until the end of 2012. In the meantime there have been two profit warnings and a service outage that spread from the UK to the Middle East and the United States, leaving many without email for three days.

Lazaridis and Balsillie conceded defeat. They stepped back from management roles last week, but remain on the board. Internal candidate Thorsten Heins replaced them – his opening message: “I don’t think there is some drastic change needed.” Investors disagreed, and knocked 7% off RIM’s share price.

Where now for RIM? A break-up or takeover is possible. One of the Asian mobile giants such as Samsung could take a pop. Amazon is understood to have considered a bid last summer.

There is still plenty of value in the firm. Business users are not yet ready to give up their BlackBerrys. Typing on a touchscreen can be slow and many people still like a 3D keyboard.

The reason service can occasionally be interrupted is that it runs on RIM’s own network of servers around the world, which pick up its traffic at handover points from mobile networks. The firm rents private internet lines to link those servers, and the information they send between them is encrypted, all of which means BlackBerry messages are hard for government and corporate spies to tap. No other handset maker can offer its customers that level of security.

Then there is BlackBerry Messenger: instant messages sent via the mobile network and internet. Google, Apple and myriad start-ups have tried to establish similar applications, but none has caught on like BBM.

The service is free, unlimited, and accessible to anyone armed with a second-hand Blackberry and a £10 a month SIM-only contract. Last summer’s riots brought to light the extent to which BBM has put BlackBerrys into the hands of a youthful, non-suit-wearing demographic.

Salvation for RIM could lie in licensing its popular services to other handset makers and software companies. “We see a licensing deal and other potential software monetisation strategies as a path to unlocking value,” says Jefferies bank analyst Peter Misek, who suggests BBM be made available to Google and Apple phones as an app and that a similar deal be offered to enterprises for the secure email service. And he believes RIM should licence its new QNX-based operating system, when it is finally ready for market, to other handset makers.

BlackBerry is looking like a low-hanging fruit for its predatory rivals, but in the fast-paced mobile industry, fortunes can change overnight. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds