Emerging markets 'make or break' for RIM

Survival of ailing phonemaker Research In Motion hinges on ability to tap emerging global markets including Asia, especially with impending rollout of BlackBerry 10 devices.
Written by Jamie Yap, Contributor

As beleaguered Research In Motion (RIM) realigns its core strengths and refocus on business users to turn the company's fortunes around, its success in emerging, high-growth markets including Asia-Pacific will "make or break" the once-dominant smartphone giant.

"If they can't get a foothold in the emerging markets, it's very difficult to see where else they can [grow]," said Rachel Lashford, managing director of mobile and Asia-Pacific at research firm, Canalys.

She said emerging markets should not be limited to only Asia. Lashford explained that RIM historically has been strong in Latin America and there are further growth opportunities for the company in central and eastern Europe, as well as other parts of the Africa besides South Africa.

The handset maker should also target China--where it currently has a "small presence"--given that the Asian economic giant was on track to becoming the world's biggest smartphone market by the second half of 2012, she added.

"They need to enter [the Chinese] market with the right strategy and not a piecemeal approach. I'm sure it's something they already are addressing, but speed is of the upmost essence," the analyst said.

RIM's prospects in international markets were highlighted during CEO Thorsten Heins' conference call on Friday, in the wake of the company's disappointing fiscal fourth-quarter 2012 results.

Heins, who was appointed CEO in January, said RIM continued to face pressure in its U.S. subscriber base, with the majority of its subscriber growth deriving from international markets. The company had "huge success" in overseas markets, selling more than 40 million entry-level BlackBerry Curve models, he revealed.

Acknowledging the fierce competition from rival handset makers, Heins said RIM was planning to launch its new BlackBerry 7 devices over the next few weeks to "reinvigorate our competitive positioning in this key segment". It would also continue to invest efforts to boost subscriber numbers, by upgrading users from feature phones to smartphones, he added.

Asia the growth spot
According to Lashford, considering that Asia has been a "bright spot" for the BlackBerry maker while the Apple and Android continue to eat up its global market share, RIM still has the opportunity to continue "aggressively" tapping Asia's high-growth markets to secure its future. These include Indonesia, Thailand, Vietnam and the Philippines, she said.

"They've noted the competition but RIM has a strong brand in many emerging markets on which to leverage, and it can afford to be aggressive to push market share," she said. "It's tough not just for them. Nokia is also trying to reassert its presence."

She added that Apple still does not have a strong foothold in emerging markets, leaving these areas wide open for competition. "The race is not won."

Lashford added that key to RIM's survival is a timely rollout of devices powered by the newest BlackBerry 10 operating system (OS), before the holiday season this year.

Tim Renowden, analyst for consumer IT at Ovum, agreed, noting that Asia-Pacific will continue to be of high importance to RIM as the company attempts to transition to BlackBerry 10 and return to profitability.

"Success and failure really depend on how well RIM can execute on its BlackBerry 10 products. If the new products aren't market-leading, RIM will be in a lot of trouble," Renowden said.

Back to business
During the conference call, Heins emphasized that "substantial change" and "creating long-term value" will be necessary for the company. "I recognize that these are difficult times for our shareholders, and it's likely that the next few quarters will continue to be challenging for our business," he said.

RIM recorded a net loss of US$125 million for the quarter, compared to US$934 million profit in the same quarter the year before. Fourth quarter revenue clocked US$4.2 billion, down 19 percent from US$5.2 billion in the previous quarter, and down 25 percent from US$5.6 billion in the same quarter of fiscal 2011. BlackBerry smartphone shipments fell 21 percent from third quarter to 11.1 million in the fourth quarter.

With RIM undergoing "significant transformation", Heins said there were necessary and immediate steps to take, first of which would be the refocus on the enterprise business.

Noting how the bring-your-own device (BYOD) trend had slowed RIM's enterprise growth rate, he said the company had to capitalize its leading position and reclaim lost market share in the business user segment.

"BlackBerry cannot succeed if we try to be everybody's darling and all things to all people," said the CEO, highlighting that with the refocus on enterprise, RIM instead would seek "strong partnerships" to grow its consumer segment.

Heins said the company would scale back on its consumer-oriented service efforts in order to concentrate on developing an integrated service offering that leverages RIM's existing strengths, such as the BlackBerry Messenger (BBM), security and manageability.

Ovum's Renowden, however, noted that while it was important for RIM to reinvigorate its enterprise products, it would do well to avoid losing its consumer customers, many of whom use lower-priced models.

Lashford, though, argued that with its strong branding in emerging markets, RIM could tap the "aspiration incentive" to upgrade users from entry-level BlackBerry devices to higher-end ones and "lock them in".

When contacted by ZDNet Asia, RIM said: "The claim that [we] will withdraw from the consumer market is wholly misleading. While we announced plans to refocus our efforts on our core strengths and on our enterprise customer base, we were very explicit that we will continue to build on our strengths to go after targeted consumer segments."

The company declined to respond on queries regarding its Asia-Pacific plans.

Organization cleanup
Heins also noted that there will be some organizational changes within the company, and admitted that the present level of complexity was "not conducive to the efficient operation of our business".

He announced former co-CEO Jim Balsillie's resignation as board director, and RIM CTO David Yach and COO Jim Rowan will also leave the company.

Heins did not provide any details on whether there will be staff layoffs, but said the company will continue to "recruit and retain top talent, while fostering an environment of innovation, learning, and development for our top people".

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