Dead man talking? RIM's death spiral accelerates

Ian,

Sadly, this story was well under way when I started collecting data on the company in 2003. Already days of sales in receivables were 49, indicating that the company's sales operations had collapsed. By 2011 they peaked at 83, indicating a complete catastrophe. (In the same period Apple went from 49 days to 15.)

Data like these mean that management had almost no customer information and no way to tell what the market wanted.

When Apple shifted the market away from cellphones to managing how customers access the cloud, RIM didn't notice. It stayed focused on yesterday's business, cellphones, while all the premium customers went to the cloud via Apple.

Because RIM didn't know the market had changed, it also didn't see that cloud access is, by definition, cross platform. Anything will do from a cellphone to giant plasma flat panel.

So, if you sell one platform, like a cellphone, you have to offer all the others if you are going to manage your customers' cloud interaction.

RIM never got this because, once its sales operations collapsed a decade ago it had no way to know what was going on. When the iPhone hit in 2007, RIM's receivable days were already at 71 and simply kept climbing. Sooner or later, the cloud would out inflate RIM and that would be that. Which is where we are now.

As a Canadian who warned Nortel's management of its coming implosion years ahead of time, to see Canada two up and two away when once again the data were clear a decade ago, this is sickening.

Francis,

The Cloud theory is an interesting one and correlating the DSO increase to general inefficiency of sales team is an outstanding one. However, I feel, RIM was done in by BYOD, more than anything else. Once, Enterprise users start accessing their Corporate Emails over a non-BB device, the Enterprise phone has to fight the consumer battle. And there is no denying that that battle would be a losing one when one is pitted against the likes of Apple and Google.

BB messanger is another clincher which no longer has the advantage it had in the past. Last year, smart messaging cannibalized nearly 1 Billion $ of revenue from Telecom players and may have been anaother catalyst in RIM's downfall. If one can message for free on other smartphones, BB is no longer as charming for millions of people in Indonesia, who use it because of free messaging.

Rahul.. absolutely RIM has done itself in by not being able to respond to the changes and challenges you itemise - BYOD, new messaging apps, and so on. The question is WHY?

It's got to be a systemic failure rather than a train of unfortunate accidents and Francis' 'days of sales in receivables' metric is really key - this metric is not about bean counting, but about customer visibility. Apple is turning product over at a faster rate and can both glean info and change the product in a responsive way... RIM clearly can't.

Now there's what, to my mind, is an allied metric which Tomi Ahonen and his comment contributors highlighted a couple of months ago when Tomi was pondering the question of why mobile device companies tend to drop off the cliff. RIM is not alone - Nokia (of course) and Motorola spring to mind.

To read the article copy - Cliff Theory' ie How Handset Makers Die - into Google.

One of the Tomi commenters asks, in light of the fact that smartphone ownership seems to run to between one and two years "Could it be that the cell phone industry is the first one where the replacement cycle is shorter than the development cycle?" It probably is...

If you tie long 'days of sales in receivables' (great puddles of stock in the channel) to ever shorter product cycles and ever-longer development cycles, it's a perfect storm. Nothing gets out alive.

Maybe they are losing their core market share in corporate devices, but they still have a huge young customer base who just want texting and like buttons to type with. I don't know anyone who actually prefers texting without buttons. Ergonomics are on RIM's side.
And the cloud is expensive, it drains internet allowances. Every time you listen to a song off dropbox or the cloud you lose megabytes. The cloud is hyped now so we get shafted in the future for our data allowances. And ten years ago blackberry didn't have all these young users. They have expanded hugely from being just a corporate device. They can still be around in ten years time. Phones are for communication.

Ian,

Thanks for your pointer on 'Cliff Theory'. It is indeed a captivating read. Talking of product cycles, I am reminded of Nortel and other old-school Telco suppliers. They had a release cycle of nearly 2 years. In the old world of monopoly/duopoly, that model worked just fine. But, the Dotcom burst and the ensuing chaos in Telecom industry really sealed the fate of such long release cycles. The Optical demand dried-up and Class 4/5 switches were replaced with much more portable softswitches. I wonder if there is any correlation between release cycles and downfall of these companies or if it related to portfolio obscolescence and inability to come back.

Rahul
I think all incumbent players understand the need for faster development cycles - that's been the cry for as long as I've been in this industry. Internet time and all that. But when the ownership cycle is way shorter than the development cycle nearly all the cards are held by the market leader(s) - in this case Apple and perhaps Samsung. If you're a confident leader you can use your own development roadmap to steer by and you can 'overlap' your development cycle across the ownership cycle. You already know what the next big thing is going to be two cycles ahead because you're dictating pace and direction. If you're a Nokia or RIM you no longer have that luxury... you're in catch-up all the time and you can never win. Look at both RIM and Nokia on the smartphone side (dumb-phones are another thing), they're suffering very similar problems. It takes literally years to engineer a new mobile OS, but by the time they (or their parter) gets it to where they thought the puck would be, it's curved away and they have to go back and develop some more..