Times are tough for Research In Motion Ltd (NASDAQ:BBRY). The Canadian smartphone maker, formerly known as Research in Motion, lost nearly 30% of its market cap recently after reporting first quarter earnings and revenue that came in far below analyst estimates. BlackBerry’s decline has been a steep one, with its stock plummeting over 90% from its peak in 2008. The arrival of Apple Inc. (NASDAQ:AAPL)’s seminal iPhone in 2007, followed by the birth of Google Inc (NASDAQ:GOOG) Android in 2008, left the company in the dust, along with former handset heavyweights Motorola and Nokia Corporation (ADR) (NYSE:NOK).
However, Motorola was later acquired by Google Inc (NASDAQ:GOOG), Nokia Corporation (ADR) (NYSE:NOK) partnered up with Microsoft Corporation (NASDAQ:MSFT), and both brands have shown faint flickers of life again. BlackBerry, on the other hand, continues to go at it alone, hoping that its enterprise customers will remain faithful to its platform. Research In Motion Ltd (NASDAQ:BBRY)’s disastrous first quarter numbers, however, extinguished that final hope for many investors.
A first quarter failure
For the first quarter of fiscal 2014, BlackBerry reported an adjusted loss of $0.13 per share, or $67 million, an improvement from the loss of $518 million it reported in the prior year quarter. Analysts, however, had expected a profit of $0.07 per share. Revenue rose 15% to $3.1 billion, but also missed the consensus estimate of $3.4 billion.
Research In Motion Ltd (NASDAQ:BBRY)’s smartphone sales dwindled to 6.8 million shipments during the quarter, with only 2.72 million BlackBerry 10 (BB10) units shipped. This means that Microsoft Corporation (NASDAQ:MSFT)’s Windows Phone, which shipped 7 million units last quarter, is now the third largest smartphone platform after Android and iOS, which respectively command global market shares of 75% and 17%. Simply look at these first quarter global shipment figures to grasp how bleak BlackBerry’s future looks.
| Mobile OS | 1Q13 Shipments (millions) | 1Q13 Market Share | 1Q12 Shipments (millions) | 1Q12 Market Share | Y-O-Y Change |
| Android | 162.1 | 75.0% | 90.3 | 59.1% | +79.5% |
| iOS | 37.4 | 17.3% | 35.1 | 23.0% | +6.6% |
| Windows Phone | 7.0 | 3.2% | 3.0 | 2.0% | +133.3% |
| BlackBerry OS | 6.3 | 2.9% | 9.7 | 6.4% | -35.1% |
| Linux | 2.1 | 1.0% | 3.6 | 2.4% | -41.7% |
| Symbian | 1.2 | 0.6% | 10.4 | 6.8% | -88.5% |
Source: IDC, May 2013 figures (released prior to BlackBerry’s 1Q14 earnings announcement)
BB10 was intended to be the company’s comeback platform. Research In Motion Ltd (NASDAQ:BBRY) bulls believed that many BlackBerry users would buy its two new BB10 smartphones, the full touch-screen Z10 and the Q10, which features a traditional QWERTY keyboard. Sadly, neither the Z10 nor the Q10 appear to have attracted much of a following, indicating that many Blackberry users have since moved on to Android, iOS or Windows phones.
Research In Motion Ltd (NASDAQ:BBRY) also remained silent regarding the growth of its total global subscriber base. Last quarter, the company reported that it had 76 million global subscribers, down sequentially from 79 million users in the previous quarter. However, BlackBerry’s silence this quarter about its global subscriber base suggests that it may have lost far more subscribers than anticipated.
BlackBerry’s pain is Nokia’s gain
Besides Android and iOS, the only growing mobile operating system is Windows Phone. 80% of Windows Phones are currently manufactured by Nokia Corporation (ADR) (NYSE:NOK), with the remainder produced by HTC and Samsung. Once Nokia finally discontinues Symbian this summer, many Symbian users in emerging markets will likely upgrade to lower-end Nokia Windows Phones, such as the Lumia 520. Therefore, Nokia could claim twice the shipment volume and market share as BlackBerry later this year – a firm testament to the success of CEO Stephen Elop’s eleventh-hour efforts to save the ailing Finnish handset maker.
Although BlackBerry is attempting to throttle Nokia’s growth in emerging markets with its lower-end Q5 smartphone, it may be too little, too late. Nokia has already made a mark in India and other markets with the Asha 210, which features a BlackBerry-style QWERTY keyboard, and the Asha 510, a low-end touch screen smartphone. BlackBerry won’t release the Q5 until later this summer, giving Nokia a few more months to build up its market share in these markets. The release of the Q5 is a humbling move from BlackBerry, which has traditionally sold higher-end devices to enterprise customers.
Falling behind the technological curve
Research In Motion Ltd (NASDAQ:BBRY)’s Messenger service, which is available on Android, iOS and BlackBerry OS, was the company’s only bright spot in a portfolio of declining businesses. BlackBerry once claimed that its mobile chat service, designed to compete with WhatsApp, Apple Inc. (NASDAQ:AAPL) iMessage, Facebook Messenger and Viber, had 60 million active global users. However, that figure pales in comparison to WhatsApp and Viber, which respectively boast 250 million and 200 million users. iMessage has 190 million users, while Facebook Inc (NASDAQ:FB) currently has 1.1 billion users. In other words, BlackBerry’s Messenger service is unimpressive, and is fairly insignificant to the company’s future.
BlackBerry also has no plans to release another tablet, after the disastrous failure of the PlayBook, which the company is leaving behind without an upgrade to BB10. However, sitting out of the tablet race could be disastrous, since companies such as Samsung and Sony are already concentrating heavily on producing “phablets” that blur the line between tablets and smartphones. Analysts at Barclays forecast that the phablet (larger than 5-inch) market will grow sales 70% annually over the next three years, evolving into a $135 billion market by the end of 2015.
In contrast, CEO Thorsten Heins once claimed that tablets will fade away “in five years” and that a single computing device, powered by a single smartphone, will be the future of computing. However, Heins has offered little insight on what that “unifying technology” will be and how BlackBerry intends to capitalize on that paradigm shift.
What BlackBerry needs to do to survive
BlackBerry is stuck where Nokia was three years ago – obsessively clinging to its past, underestimating its competitors and refusing to partner up with a larger name in mobile operating systems.
BlackBerry mistakenly believes that its reputation for robust security will keep the revenue flowing in from larger businesses and government agencies. Unfortunately, most major government agencies, including the Pentagon, have already dumped their aging BlackBerry devices for iPads and iPhones. If Apple Inc. (NASDAQ:AAPL)’s security measures are tough enough for the Pentagon, then they should be more than adequate for businesses.
If BlackBerry wants to survive, it needs to learn humility. Partnering up with either Google Inc (NASDAQ:GOOG) or Microsoft Corporation (NASDAQ:MSFT) could be the company’s only salvation. Without the backing of a widely adopted mobile operating system, the availability of apps – the lifeblood of a smartphone – will remain sparse.
If Elop hadn’t forced Nokia to abandon Symbian, the company would be stuck in the same position as BlackBerry today. Heins needs to step up, acknowledge that Research In Motion Ltd (NASDAQ:BBRY) is dying a slow and agonizing death, and realize that users are going to need much more than a QWERTY keyboard from the last decade to satisfy their modern smartphone desires.
The article The End of the Road for BlackBerry originally appeared on Fool.com and is written by Leo Sun.
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