New Research In Motion (NASDAQ: RIMM ) CEO Thorsten Heins hasnt had the warmest
reception since the companys blockbuster weekend announcement that he would be
replacing co-CEOs Jim Balsille and Mike Lazaridis. Heins' declaration this
week that no "seismic changes" will be forthcoming sent RIM's stock into
the Nasdaq doghouse. And he is aware many investors want to take away RIMs
kibble. RIM hardware has been criticized for being so previous-generation
(thanks in part to comparatively low-resolution displays and underpowered
processors), but whats really taken the air out of the Canadian tech companys
sails has been the BlackBerry operating system (or BBS)the software that powers
the devices. When Apples (NASDAQ: AAPL ) iPhone launched in 2007, it was running
the freshly minted iOS, a next-generation operating system that was free of
legacy baggage and which quickly proved superior to BBS. While iOS has only
gotten better with subsequent releases (its currently on version 5) and Google s
(NASDAQ: GOOG ) Android operating system has also become a force to be reckoned
with, BBS has fallen further behind. The recently revealed BlackBerry OS (BB7)
has been roundly criticized as being a stopgap that will do little to stem the
exodus of BlackBerry users. A rough ride for BlackBerry software The salvation
of RIM was supposed to be the 2010 purchase of QNX Software Systems from Harman
International (NYSE: HAR ). QNX had built a reputation for providing rock-solid
system software used in the automotive, medical, aerospace, telecommunications
and defense industries. If QNX was good enough for these demanding applications,
it should be more than capable of powering the next generation BlackBerry
operating system. The architecture of the QNX operating system is intended to
provide real-time multitasking, a feature that is valuable in a multipurpose
device and would allow RIM to leapfrog ahead of other mobile platforms in this
key area. Apple itself had followed a similar path when it ditched its desktop
operating system in 1996, to bring Steve Jobs back into the fold in with his
NeXT OS (which became the foundation of Apples current Mac OS X). Unfortunately,
things have not played out as smoothly as RIM would have hoped. Among the
stumbles: April 2011: the PlayBook tablet, powered by QNX, is launched to
critical reviews. The PlayBook OS lacks native e-mail, requiring a BlackBerry
handset, touching off complaints that the tablet was rushed to market and
raising suspicions that the QNX-based OS that RIM has been banking on will not
easily integrate with existing BlackBerry services. October 2011: RIM announces
that the BlackBerry version of the advanced QNX OS will be called BBX. Three
months later, RIM has to change the name to BlackBerry 10 (or BB10) after losing
a lawsuit over rights to the term BBX. December 2011: RIM announces that the
release of its BB10-based handset will be delayed until late 2012, blaming the
need to adopt more energy efficient chipsets that wouldnt arrive until mid-2012.
With RIM bleeding users and the likelihood of having to face the release of the
iPhone 5 at that time, this delay may prove fatal to a meaningful BlackBerry
comeback. In January at the International Consumer Electronics Show , the
QNX-based PlayBook OS 2.0 was revealed, finally incorporating e-mail and
calendaring. This helped reduce speculation that QNX could not be fully adapted
to the BlackBerry platform, but that relatively good news was tempered by a lack
of even a prototype BB10, and there was speculation that RIM was cutting the
number of planned BB10 handsets for 2012 to possibly only a single handset. This
single-model strategy has worked for Apple, but RIM typically has half a dozen
smartphone models available at a time. Exploring licensing alliances Could
licensing be in the works? RIM shares temporarily rose in previous weeks on
rumors the company was in conversations with Samsung (PINK: SSNLF ). While a
purchase of RIM seems unlikely (Samsung makes its own successful smartphone and
tablet hardware, and is giving Apple a run for its money), the possibility of
Samsung licensing BB10 isn't all that remote. The Korean company currently
uses Android to power its devices, and the ability to offer BlackBerry products
could offer it a way to differentiate its products from the dozens of other
Android smartphone makers, while also possibly cutting the rising costs of
licensing Android. Another factor that might support the theory that RIM is
pursuing licensing as an option is the rumored trimming of the handset lineup
the company intends to release later in 2012. Why release a slew of smartphones
if they will be competing against versions released by other manufacturers?
During his first conference call as CEO, Heins refuted rumors that licensing
BB10 was a focus for now, but did add that he would be willing to entertain the
idea. Take that as you will, but with Microsoft (NASDAQ: MSFT ) scooping
anywhere from $3 to $6 in licensing from every Android device, and with the
potential to earn $1 billion or more yearly in royalties (Google itself doesnt
charge manufacturers for use of Android OS) clearly there is money to be made in
licensing a mobile operating system. It could well be that buying a software
company with a reputation for building a bulletproof operating system thats
trusted to power a wide range of mission-critical systems may have been the
right choice for RIM. On the other hand, QNX typically runs systems that dont
need to sip energy, a key requirement for mobile devices. And the RIM and QNX
engineers are obviously having a tougher time than expected in porting
BlackBerrys key features into the QNX platform. While the QNX-based PlayBook 2.0
OS is an encouraging sign after several years of stumbles, it remains to be seen
whether BlackBerry 10 will save RIM from becoming a smartphone industry
footnote.
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