Among several options that Research In Motion(s rimm) is currently reviewing for its continued transition is the sale of its BlackBerry handset division. The company last month said it was working with J.P. Morgan Securities LLC and RBC Capital Markets to determine next steps as RIM expects an operating loss for its first fiscal quarter of 2013.
The Sunday Times (registration required) first reported the news with Reuters noting that RIM may split its hardware business from its messaging service, which is still widely used by enterprises and consumers around the world. The Times suggests that Amazon(s amzn) and Facebook(s fb) would be most likely interested; Apple (s aapl), Google(s goog), and Microsoft (s msft) all have their own software platform for smartphones and tablets.
The situation for RIM is both dire and sad to see, but not unexpected. Indeed in my year-end predictions post for 2012 last December, one of my 16 mobile prognostications was this:
Research In Motion will no longer exist as we know it today. I’d like to be wrong on this, as competition is good for all, but RIM’s missteps and late reactions to competition finally exact a toll: By year-end, I suspect the company will be purchased, mainly for its patents, or will refocus as a services-oriented entity.
I presume that any sale of RIM’s hardware unit would include the patents, essentially leaving the company as a services business. On the surface that may not sound like a bad play, since RIM’s hardware sales growth has lagged the competition as both iPhones and Android devices have invaded the enterprise.
The problem is: Selling off the hardware unit will also rid RIM of the majority of its revenue stream. In the third fiscal quarter of 2011, which was reported this past December, RIM said that hardware sales accounted for 79 percent of the company’s revenue. And that’s with slowing hardware sales. Giving up the hardware unit will simply give RIM a bigger bankroll to keep the services division alive for as long as possible, meaning the company will be smaller and relegated from a one-time market-maker to a has-been with little power.
As I’ve followed along and reported RIM’s decline these past few years, the BlackBerry faithful keep offering commentary of a transition that will eventually help or the next version of an operating system that will put RIM back on top. While the optimism is welcome, the stark facts remain and are leading the company down a path that will never return it to prominence in the hardware market.
The company has been in constant transition since the iPhone arrived in 2007, even if the company was in denial of sweeping changed needed. And once it did recognize the need for change, it reacted too slow and too late. At this point, the only questions I have left are: How will RIM fare as a services-only provider if the hardware unit is jettisoned and who will tweak the BlackBerry phone to its liking and make a run as the fourth player in the smartphone market?