RIM's BlackBerry 10 delay pushes it to the brink

It's been clear to me since April 2010 that BlackBerry maker Research In Motion (NASDAQ:RIMM) was in trouble, stagnating while other smartphone competitors were innovating. The company eventually realized this and decided to move to its next-generation Blackberry 10 platform, but it may be too little, too late.

The last few months have been a stream of mostly bad news for RIM: executive departures, the loss of ODM partner Celestica and speculation about whether Amazon or Facebook will buy the company. The sense of crisis came to a boiling point Thursday as RIM posted an incredibly weak fiscal first quarter, and said it will delay Blackberry 10's launch until the first quarter of 2013 and cut 5,000 employees. It is more clear now than ever that RIM's trajectory is unsustainable--something has to give.

Transitions to new platforms are never easy. Just ask Nokia (NYSE:NOK). However, time is running out on RIM to turn the ship around, and it's looking increasingly likely that the ship may sink. Between now and the launch of Blackberry 10, RIM will face increasingly tough smartphone competition, and sales may slide further, especially if an Osborne effect takes hold and loyal customers hold off on buying BlackBerry smartphones in anticipation of BlackBerry 10 (RIM still has a subscriber base of 78 million).

The problem is compounded by the fact that RIM's window of opportunity to serve as counterweight for carriers against the might of Apple's (NASDAQ:AAPL) iOS and Google's (NASDAQ:GOOG) Android is closing rapidly. It appears increasingly likely that carriers will throw a significant amount of support this fall and winter to Microsoft's (NASDAQ:MSFT) Windows Phone 8. That will seriously undercut RIM's efforts with BlackBerry 10, if it gets that far.

For RIM CEO Thorsten Heins, BlackBerry 10 is a platform for the future, one which RIM may license, but which is not just about the next smartphone or tablet. "It is really about a great new platform that we're building. So the teams are fully focused on this. They are working hard to get that done," he said on the company's earnings conference call, according to a Seeking Alpha transcript. "I guess would we have loved to be a bit earlier? For sure. But we are where we are in quality and a--just an outstanding user experience, that is what we want to deliver when we bring BlackBerry 10 to market."

I don't think anyone would expect Heins to say anything less. He has a strategy he needs to execute on if RIM has any hope of making in as a long-term smartphone player. The problem is that the market may not be as patient. RIM is in the second quarter now of a strategic review, and investors will soon begin clamoring for what the result of the review is: a sale, spinning off RIM's hardware business, opening its BlackBerry network. No one knows for sure, and Heins did not give any clues.  

As CCS Insight analyst John Jackson told me, the world we are moving toward is one dominating by platform players with cloud capabilities: Apple, Google, Microsoft, Amazon and Facebook. The power is less in the hands of the likes of Nokia, Samsung, HTC and RIMs than ever before. Can Rim survive in that world? Heins said Blackberry 10 is an open platform that will leverage the cloud. But will RIM's standing and relative position to other cloud players by early next year be strong enough for anyone to care?

Jackson said RIM has a closing window to execute its plans. "In that regard it is very damaging delay," he said. "If there is a positive to this, and it's cold comfort, you won't be going toe-to-toe with Apple in the channel in Q4. Assuming they launch in Q1, They will miss the holiday season. They will be an environment that is less contaminated by the best of what everyone has to offer."

Cold comfort, indeed. What will RIM do next? I think whatever it decides on, it may not be enough to turn the company around. "It does throw into sharper relief the dire nature of their situation," Jackson said of the delay. "Having said that, there has been no shortage of speculation of what might happen to these guys. So far, the answer is nothing."

And that may be the most damning assessment of all. --Phil