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Therese Poletti's Tech Tales

New BlackBerry devices risk death on arrival

9/20/12 9/20/2012 (MarketWatch)

SAN FRANCISCO (MarketWatch) -- The last two weeks have not been kind to Research In Motion Ltd.

The pressure has now intensified for next week, when the embattled smartphone pioneer will host a developer conference in Silicon Valley starting Tuesday, and then report its fiscal second quarter on Thursday.

Just days after Apple Inc.'s big iPhone 5 launch last week, Yahoo Inc. (YHOO) Chief Executive Marissa Meyer told employees they can now get an iPhone, an HTC or Samsung phone running Google Inc.'s (GOOG) Android software, or a Nokia Corp. (NOK) Lumia phone. The Internet pioneer is going to discontinue IT support for BlackBerry.

In addition, James Faucette, an analyst with Pacific Crest Securities, wrote in a report last week that Research In Motion's (RIMM) current products are gathering dust on some carrier shelves. "Several retailers we spoke to said they had not sold a single BlackBerry in over a month," Faucette wrote.

The final humiliation came in the form of a patent pact with Microsoft Corp. (MSFT) on Tuesday, which turned out to be the exact opposite of what many investors had been expecting. Its shares jumped on headlines that the embattled RIM had signed a licensing agreement with Microsoft, but then slipped back once the details were learned: it was RIM licensing technology from Microsoft, instead of the other way around.

After all of this bad news, RIM needs to convince developers at its BlackBerry Jam in San Jose next week, that its forthcoming devices are worthy of their time and attention. More than ever before, the company and its top brass need to win over the developer attendees, investors and the press and show why its new devices and BlackBerry 10 software coming out next year won't be dead on arrival.

It is facing an uphill battle. Its biggest competitors have all unveiled new smartphones this month, most of which will be on the market either this quarter or next, in time for the typically busy holiday shopping season.

Apple (AAPL) was swiftest to market, and the masses will line up Friday to buy the new iPhone 5, with a huge existing pent-up demand. On Tuesday, Apple said pre-orders for the iPhone 5 have shot past the two million units in the first 24 hours, helping its shares pass $700 this week.

HTC, Motorola ( now owned by Google), Microsoft and Nokia all introduced new phones that are expected to be available this year in various markets. (To be fair, Microsoft did not give any dates for availability of phones on its new mobile operating system).

But after a host of delays, Research In Motion won't even have its new BlackBerry 10 devices and software out until sometime in early 2013. The company appears to have lost its luster, and now even some of its shelf space with carriers, despite comments by Verizon Communication Inc.'s (VZ) CEO to investors earlier in September that he wouldn't count RIM out.

"RIM cannot compete on cost, it cannot compete on user experience, it does not have the range of devices offered on other ecosystems, it cannot compete on content and to date it has not been able to compete on development talent," Pacific Crest's Faucette wrote in a fairly bleak note.

As part of its efforts to get developers on board, RIM is making an "alpha" version of the devices that run its forthcoming BlackBerry 10 software available to "qualified developers" who attend BlackBerry Jam next week. It added, however that developers have to be registered by Friday, Sept. 21, in order to obtain a device at the show. Attendees are also not allowed to pick up a device on behalf of a colleague who was unable to make it.

That seems like an overly strict policy at a time when RIM needs all the developer support it can muster. In contrast, Google gave out goodie bags with its new Nexus 7 tablet, a Galaxy Nexus smartphone, and a Nexus Q media player to all attendees who lined up on the first day of its Google I/O developer conference in June.

Many investors believe that RIM is fighting for an increasingly small share of the smartphone market. Over the last 12 months, shares have lost nearly 70% of their value.

Trip Chowdhry, an analyst with Global Equities Research, wrote on Tuesday, ahead of Motorola's new smartphone launch in London this week, that "probably 98% of mobile market will be split between Google and Apple, with Google leading Apple," he said. "Nokia, Microsoft and RIM will probably struggle in the remaining 2% of the market."

RIM executives need to show off working new devices next week that can convince developers and investors that they are novel, nearly complete and offer features that are worth waiting for. Otherwise, after a sea of more timely new products by rivals, RIM's new smartphones risk being dead on arrival.