JANUARY 24, 2012 No sale: Why a new owner can't save the BlackBerry A new CEO promises more of the same, so some investors call for RIM to be sold. Here's why that is a bad idea for troubled RIM By Galen Gruman
InfoWorld Within hours of Research in Motion getting a new CEO Sunday night, some investors were again calling for the company to be sold, having lost faith that RIM's management can save this listing ship. That's hardly a vote of confidence, nor a new desire. Just last week, rumors that Samsung was looking to buy RIM, caused Samsung to issue a swift public denial of any interest. Every few weeks, there seem to be rumors that some company wants to buy RIM. I suspect much of that talk is sparked by investors hoping for a quick runup in RIM's stock price so that they sell their shares at less of a loss; some no doubt comes from financial analysts and investors hoping to pressure RIM's management to fix the troubled device maker. But it would be a terrible mistake if it happened. The reason that investors (and many IT organizations, I suspect) call for a new owner is that they want a knight in shining armor to rescue the company, which dismissed the iPhone in 2007 as an inconsequential product and whose co-CEOs (now board members) have been repeating that assertion ever since, despite the ascendance of first the iPhone and then Google Android as RIM's own BlackBerry users began jumping ship. BlackBerry is now the distant No. 3 in the U.S. smartphone market as a result. But the sort-of-new CEO, Thorsten Heins (he had been the COO), is no fairy-tale white knight. He's promising to hold the course of RIM's unfulfilled business plan, making the usual noises about wanting to focus on the consumer and being innovative — noises that RIM has made for a couple years but not delivered on. His concessions have so far been minor, such as indirect criticism of the slow delivery of products at RIM and a lukewarm willingness to eventually consider licensing the BlackBerry platform or its email software to others. Investors were not impressed, sending RIM's stock down 8 percent yesterday amid renewed calls for the company to be sold to some white knight. The sad truth is that a white knight can't fix RIM with some magical sword anyway. If that were possible, it would have been done already. If someone were to buy RIM, you can kiss the platform good-bye, at least as a mainstream option. If RIM were to be bought, it would be stripped for its parts, and the BlackBerry would die sooner or later under the new owners. Fortunately for RIM, its low value means it's not likely to be bought, giving it time to resurrect itself — regardless of the frustrations of its stockholders and financial analysts. The truth is that if RIM is to rebound, it needs to save itself. Yes, RIM had proven multiple times that it can't execute anything really different than what it's already delivered, as its current BlackBerry 7 devices demonstrate. That's why it's QNX-based BlackBerry reboot effort known as BlackBerry 10 OS — which has been delayed until late 2012 — is so critical. I think it's RIM's last shot at surviving as a major mobile player. At this stage, RIM is too far into that effort to change directions yet again; this needs to work, or RIM needs to call it a day. When RIM's stock tanked before the holidays — a sign its investors were giving up on RIM — I started asking analysts, CIOs, and others what they would miss about the BlackBerry were RIM to suddenly disappear. I expect RIM to linger for a few more years at least, but I posed the question that way to understand what the real value was they saw in today's RIM, to see if maybe RIM could use what it has already built as the basis for a comeback. If a white-knight scenario were to be plausible, there'd need to be such untapped value for a new buyer (or management team) to leverage. I got few real answers, which suggests strongly that the value of RIM's technology portfolio has largely disappeared. RIM clearly came to the same conclusion more than a year ago when it announced it would drop its legacy BlackBerry platform in favor of the QNX operating system it bought in spring 2010. That need for a new core makes sense, given that the whole approach to devices, operating systems, and security management that traditional BlackBerry platform encapsulates belongs to a bygone era. RIM was an amazing innovator in the early 2000s, bringing messaging capability to those on the road using the primitive paging networks of the day. We take that for granted now, but a decade ago, it was as revolutionary as the first PC, as Lotus Notes in its early years, and as the first laptop. Like Notes, the BlackBerry has become an awkward living fossil, a porked-up relic distorted and hobbled by the layers of stuff added over the years in an environment fundamentally changed by the iPhone and the consumerization phenomenon. So what value does RIM still have? Here's the short list. The BlackBerry brand It's possible that someone might want to use the BlackBerry brand for their own messaging-oriented devices, to appeal to those who like physical keyboards on smartphones and just want a device for email and social messaging. There are Android devices that have comparable keyboards but are gunked up with apps, so transplanting the BlackBerry brand to them would be problematic. Likewise, Windows Phone 7 is very much oriented to messaging, a BlackBerry forte, so the BlackBerry brand might be valued by one of its device makers (especially the BlackBerry Messenger brand for RIM's popular but proprietary mobile messaging service). But users wouldn't get the physical keyboard associated with the BlackBerry brand. In neither case would IT get the security controls it associates with the BlackBerry moniker. The brand value seems more nostalgic than real, at least until people are given enough time to forget the original brand's specific attributes — which may be why few old brands get resurrected for use on a different device. The 500-strong security policies in BES IT likes the BlackBerry because, when a BlackBerry Enterprise Server (BES) is also installed, IT can tie up the BlackBerry with an amazing variety of knots to control the device, how applications can interoperate, and what a user can do with it. For a control freak, a BES-managed BlackBerry is the ultimate playground. But IT is no longer calling the shots; if it were, RIM would be sitting pretty in the same spot it occupied in 2006, and iPhones and Androids would be at best interesting toys for 20-somethings. The truth is that for most use cases, IT has largely come to peace with the level of security in iOS and what is slowly emerging for Android. There are of course some circumstances where BES's vast array of controls are actually necessary, and despite the capabilities of mobile device management (MDM) vendors, iPhones and Androids can't be managed to the required levels. I could imagine a defense contractor such as Harris or Computer Sciences Corp. (CSC) buying RIM to provision defense and spy clients, and the occasional other business, much as such firms today provisioned super-secure, hardened PCs to the same clientele. Even here, you have to wonder about the long-term value of BES. Both the National Security Agency and Defense Dept. are working on more secure forks of Android, to get BlackBerry-like security while retaining the much more flexible capabilities of Android due to its support of a broad array of apps and services. Companies like Harris and CSC already see that writing on the wall, thus offering Android- and iOS-based systems for more broad military and government use. Oh, and users don't buy BlackBerrys because they care about BES's policies. As users are now driving much of the mobile momentum, what matters to them will matter to RIM's fate and to any possible buyer. RIM knows that, as evidenced by its two years of talk about refocusing the BlackBerry for consumers, but its current OS and device lineup doesn't really walk that talk, despite the success of its popular BlackBerry Messenger instant messaging app. The secure BlackBerry network You don't hear much about this aspect of RIM's offering much these days, but it matters very much to security-conscious IT folks. RIM routes all messages through its servers, creating a secure connection to the enterprise servers that make it very difficult for a hacker to spoof their way in via a BlackBerry. It's true that the cellular carriers pay a lot of attention to their own 3G and 4G networks' security, which may explain why network security is no longer a top selling point of the BlackBerry, but having that secure control in the middle remains a unique BlackBerry capability unmatched by iOS, Android, or Windows Phone. This use of the RIM network as a trusted middleman is also why some BlackBerry features don't work if you have only a Wi-Fi connection, as Wi-Fi communications don't go through the RIM server. On the other hand, RIM has seen embarrassing service outages in its network in recent months, causing all messages to stop dead in their tracks as the network fell over. And several countries — including the United States — have insisted on access to the RIM servers through backdoors so that they can look for criminals, rebels, and other undesirables, thus making the security value of RIM's network less appealing to the defense and spy communities that like the RIM network approach. The RIM network also costs money to maintain, and that's an issue for any would-be buyer. And outside of IT and a few spooks, users don't buy BlackBerrys for its network security. Two-factor authentication Some BlackBerry models support two-factor authentication; that is, you enter a code sent to a separate device when accessing a secured resource from your BlackBerry to better prove the BlackBerry isn't stolen and the user actually is who the user says he or she is. Although some Windows Mobile devices in the past featured a similar capability, today only RIM offers two-factor authentication support. Again, this is an issue for IT and a small percentage of users. A variety of vendors are trying to bring two-factor authentication, or something close enough, to Android and iOS. The BlackBerry value is limited to a small world of users All this shows that the traditional BlackBerry's unique strengths — as groundbreaking as they once were — aren't as relevant to today's users. A small subset of the market really does need the security strengths of a BlackBerry, and duplicating those in iOS, Android, or even Windows Phone won't be easy. After all, BES has the advantage of having a simpler universe to manage than the more modern, app-oriented platforms people now want; securing a messaging device is much easier than securing what is in essence a portable computer. Just ask any Windows admin. Users also expect more freedom and flexibility in a device that feels like a computer -- and their managers like to exploit those capabilities, so IT is less able to force severe controls (à la BES) on devices seen as multipurpose minicomputers. As IT makes the mind shift from phone-as-e-mailer to phone-as-computer, it also makes the shift to thinking about control more in PC terms. And let's be honest: Less control is typically asserted over a PC than over a BlackBerry, making it hard to justify BlackBerry-like control over iOS, Android, and Windows Phone devices. (Yes, there are highly controlled PC environments out there; I'm speaking of the typical situations.) That is really RIM's problem: Its value belongs to a different age and a different environment. No buyout can change that fact. That's why RIM keeps talking about focusing on consumers, despite its historic IT orientation. Thus the BlackBerry reboot effort. (Given the dominance of iOS and Android among consumers and Microsoft's renewed, consumer-oriented push in mobile, whether there's enough room for RIM's purportedly consumer-oriented BlackBerry 10 is a fair but separate question.) If RIM's BlackBerry reboot works to make it relevant and compelling in today's environment, the company won't need a buyer. If the reboot fails, any buyer will want just its patent portfolio, customer list, and perhaps brand — to strip it, not save it. Either way, hoping for a white knight to rescue RIM is at best wishful thinking. If you want RIM to rebound, wish not for a buyout but for a successful BlackBerry 10. And that will require real leadership, new thinking, and strong execution from within. That's RIM's real challenge. | 
Austin, Texas 
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