We’ve become so accustomed to treating Research In Motion as a dying enterprise, any indication that it might, actually, perhaps, maybe survive is nothing short of miraculous.
Still one week away from the launch of the new BlackBerry 10 operating system, the company saw its stock rise by 10% on Monday alone, closing at $17.41 on the Toronto Stock Exchange, having risen from a 52-week low of $6.10 in September. Anticipation for the new operating system—which has received positive, if not effusive, reviews—is partly responsible for the gains. But more important for Monday’s improvement was president and CEO Thorstein Heins’ admission to German media that the company is considering selling its hardware division. In an interview with newspaper Die Welt, Heins noted RIM’s in the midst of a strategic review that is considering “several options, including the sale of hardware production.” RIM might also begin licensing its software, but any decision will come after the launch of BB10, according to Heins.
Could this really be RIM’s Lazarus moment? If so, it may come thanks to the same alchemy that once saved another ailing tech giant: IBM.
It might seem preposterous that RIM could stop making BlackBerrys and still survive, but there is a big, blue precedent for the move. For most of the last century, IBM was the market leader for business technology, particularly mainframe computers. But it fell behind as other, nimbler competitors like Microsoft emerged. In 1979, the company scored a billion dollars in profit. By 1993, it was losing $8 billion a year and pundits were predicting the corporation would be broken up and sold for parts.
But IBM saved itself by recognizing, in the words of CEO Lou Gerstner, that there was no future in “just pushing iron down [its customers] throats.” The company shifted away from the hardware business, even selling its entire PC division in 2004. IBM instead became a software and consulting business. IBM made close to $16 billion in 2011, with 60% of the profits coming from software licensing fees and service contracts.
Regardless of the merits of the BB10, it seems unlikely RIM will ever regain the market share it’s lost to Android and Apple. Following IBM’s example, however, shows RIM might save itself by cutting the cord on its signature phone.
James Cowan writes for Canadian Business where this first appeared.
Tuesday, January 22, 2013