Is RIM down or is Apple (and others) up?

Today, perhaps for the first time, BlackBerry-maker Research In Motion appeared to officially lose the confidence of the analyst community. After months of grumbling about RIM’s too-little-too-late product launches (most recently its widely anticipated PlayBook tablet), RIM finally sent stock watchers over the edge by releasing a first quarter profit warning Thursday that it blamed on further product delays.

Several responded by downgrading RIM’s already beleaguered shares, which closed down 14 per cent Friday at US$48.65 on the Nasdaq. But not before offering some pointed criticism. “We really want to believe, but … as much as we like the stock (and we have until now), last night’s warning caps what has been a string of strategic and execution missteps,” Cormark Securities analyst Richard Tse said in a note. Another analyst suggested that perhaps it was time for RIM’s co-CEOs Jim Balsillie and Mike Laziridis to ditch their sharing of the top job, while yet another seemed to be looking for an outlet to vent months of pent up frustration. “We’ve lost confidence in RIM and don’t see this as a one-time miss,” National Bank financial analyst Kris Thompson said. “We’ve heard for too long about RIM’s great product roadmap. Consumers are not listening nor waiting.” He went on to write, “RIM does not even seem to have dual cameras on its upcoming BlackBerry product line-up. The last time we checked, video is the future.” Ouch.

But while there’s no question investors are disappointed, perhaps it’s time to re-examine why we expect so much of the Waterloo, Ont.-based company. Sure, there was once a time when RIM was top dog in the smartphone world, but that was mostly because it was the only one out there with a decent smartphone to sell. After years of targeting business clients (who, incidentally, still like the BlackBerry’s keyboard and secure email), RIM enjoyed a brief period that began in late 2006 when consumers also became interested in what a BlackBerry could do. So RIM threw on some extra features like a camera and MP3 player and briefly cornered the market with models like the Pearl and Curve. And then Apple came along, launching its original iPhone in mid-2007, changing the game forever. While it took a while for the iPhone’s full impact to felt on RIM’s fortunes, this stock chart (comparing RIM, Apple, Nokia, as well as Microsoft and Google) shows a clear changing of the guard by late 2009:

There’s no question Apple out-innovated RIM in the smartphone space, but it should be noted that Apple has also bested everyone else too. Look what happened to Nokia, the world’s biggest phone maker, which has since been forced to throw its lot in with Microsoft. Other device manufacturers have simply tried to copy the iPhone, with varying degrees of success. Google, meanwhile, is pursuing a different strategy by focusing on software only. Tellingly, no one else has managed to out-iPhone the iPhone even after four years, an eternity in the tech business.

Given that smartphones still account for a relatively small proportion of global mobile sales, the good news for RIM is there’s still plenty of room for everyone in a fast growing market. RIM may no longer be driving the bus, but it’s not going to be running behind it either. It still sells loads of BlackBerrys in North America, Europe and Asia, and continues to expand into developing markets. In fact, RIM’s share performance over the past five years actually stacks up rather well compared to others in the smartphone space—other than Apple’s, of course. To be sure, RIM is far from a perfect company, and there’s clearly much room for improvement. But could it be that RIM’s biggest failing is that it didn’t invent the iPhone? If so, then it has plenty of company.

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