James Lee Phillips
Jun 1, 2012
Featured

Dark times for RIM and HP: Misery loves companies

Dark times ahead for RIM Chief Executive Officer Thorsten Heins as RIM struggles to keep the lights on long enough to release the much anticipated BB10 OS.A decade later, BlackBerry has become Palm. After dominating the mobile market and revolutionizing the boundaries of what a personal device could offer, the company faced the one-two punch of a calamitous economic climate and disastrous internal reorganizations. Just like Palm, RIM is in a position where its only hope is in a major new product line -- and it may not even be able to survive to launch time.

When HP acquired Palm, it acquired some of the Palm curse. Now HP and RIM are simultaneously struggling to weigh unattractive options and prevent total collapse. CEO Meg Whitman has so far kept HP's situation from becoming as dire as RIM's, but both companies face the possibility of selling off the iconic company piece by piece and retiring into the enterprise software underworld. HP hasn't quite called the bankers in, but both companies have decided upon five-figure layoffs in order to keep the lights on. 

The Apple in Eden. RIM's fall from smartphone grace can be traced directly to Cupertino, but HP Living in Apple's shaddow: to date, no other tablet maker has been able to elbow its way into the Apple-dominated market. RIM and HP included.is also a casualty of the Apple ascendancy. No company that revolves around PCs and PC hardware denies that the release of the iPhone was the ultimate game-changer, the herald of the Post-PC era. RIM's smartphone denial doomed their core business; HP relied a bit too confidently on a transformation and a more diverse set of offerings. In both cases, the introduction of a fancy new touchscreen phone and tablet device was too little, too late; past leaders can rarely overcome waiting to become followers. This doesn't bode well for RIM's attempts to push on with BlackBerry 10, but it is a major incentive for both companies to sell off part or all of their hardware business.

Dev Disconnections. Who wants to develop RIM apps? Who wants to take the ball and run with  WebOS? Certainly not the folks making money hand over fist (or at least two dollars per download) on iPhone and Android app code. Definitely not HP's Enyo devs, who are now part of the Google sprawl. Even Microsoft's app market looks like a safe bet compared to BlackBerry and Palm -- especially with Redmond's welcoming attitude towards devs for Metro, this fall's potential if unlikely wunderkind. This isn't a deal-breaker for the software side of either company, but it does raise questions about the innovative potential of the teams that are left behind.

Software and Services. RIM and HP are both trying to ride both sides of the hardware/software fence. Once Apotheker came in, HP's master plan was to spin off consumer hardware, and redefine itself as an enterprise company -- going so far as to overspend to acquire Autonomy, a deal that Oracle's Larry Ellison passed on and even HP's own CFO hotly opposed. Replacement Meg Whitman decided to stay the course with enterprise AND hardware, although one can assume that "staying the course" doesn't mean losing another $30 billion in market cap within eleven months. That was a bumpy road, during which HP released its only attention-grabbing device in years. And the attention largely came due to a botched launch, followed by lukewarm reviews, followed by discounts so deep that they created a sudden consumer feeding frenzy -- all of which occurred over the span of six months in 2011.

RIM has been touting the upcoming BlackBerry 10 devices with a "failure is not an option" mentality, but even an unlikely success may come too late. The latest regulatory filing shows that the hardware division is hemorrhaging money, and BlackBerry shipments dropped 80% in Q4 2011 alone, all of which is sobering evidence that RIM's future -- maybe even its present -- can no longer be about the product line that put it on the map. BlackBerry's tablet future may look better than HP's recent TouchPad history, but Apple is losing no sleep about more high-profile products from Amazon and Asus -- and if Samsung is any indication, Apple can make even limited success in the tablet market cost more than total failure.

Bring Your Own Demise. It seems almost inconceivable that RIM and HP could ever lose standing with their steadfast business customers. Consumer tastes are notoriously trendy, but the business world is populated by sober, rational, get-things-done people who aren't swayed by the latest fancy gizmo.

Well, except when workers insist on bringing their new fancy gizmo to work, and doing actual work on it. Not to mention successfully integrating their fancy new gizmo with the company infrastructure in a way that reduces costs during a shaky economic climate, increases productivity during a time of leaner manpower and greater employee mobility, and can be made to conform to the required level of security during a time of hacker-induced paranoia.

HP has been using IBM's turn-of-the-century turnaround strategy as a model, which included getting out of hardware and into IT. However, even IBM has been preoccupied with the BYOD trend, banning Siri and Dropbox over serious security concerns. RIM's share of IBM's patronage has dropped to a mere tenth of the workforce -- with double the number preferring to use Android and iOS devices. But HP has a BYOD ace in the hole that also supports its enterprise hardware future: the Virtual Application Platform, which supports thin-client desktops, laptops, and mobile devices regardless of operating system.

Indeed, RIM's initial successes were the touchstone for both smartphones and BYOD itself. Before the term "CrackBerry" was coined, before Paris Hilton and Barack Obama, RIM made its name as the only BYOD game in town. Back then, nobody could touch push email and airtight security measures, but third-party solutions have brought consumer devices on par (and beyond). RIM's only silver lining may be its expertise on the MDM side -- they've already begun rolling out Mobile Fusion to the competition. But once again, RIM is facing the same challenge that HP took on with WebOS -- and fumbled, irrevocably.

Non-Manufacturing Entities. Both RIM and HP could fall back on their patent holdings, as so many once-great companies from Nortel to Kodak have done lately. Palm's patents alone were said to be worth as much as Apple's (at least in 2010), and overall HP has one of the largest portfolios in the world. They've already begun been actively licensing and monetizing IP, including a sizable deal with Google concerning Android.

RIM's patents are worth somewhere between $1 billion and $4 billion, depending on how eager tech companies might get during a fire sale should RIM fulfill increasingly plausible predictions of bankruptcy. A better move might be to generate recurring revenue by focusing on licensing as part of a larger strategy to stay afloat. Unfortunately, RIM can't count on the Nortel patents that it shares with Apple, Microsoft, Sony, et al -- except as bargaining leverage, should one of those companies consider an acquisition or partnership.

Some analysts have been predicting that the two companies could -- or should -- become one. It seems that HP hasn't completely lost its desire to make something of WebOS, and could seriously benefit from a company with valuable patents, enterprise history, and MDM software (or even mobile hardware) expertise. RIM is one step away from dire need of a buyer, or at least a partner, to achieve anything but deterioration and wholesale looting by the opportunistic Visigoths of the tech industry. After all, the two have flirted with other in the past. But would HP be able to innovate with the assets, or simply be exposing itself to another round of the Palm Curse?