BlackBerry can still pull out of graveyard spiral

Research In Motion could return as a smartphone leader by providing a true next-generation handset where the brand is still popular, such as in the Middle East.

BlackBerry smartphones are popular in the UAE, where consumers are drawn to its messaging service. Jaime Puebla / The National
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Research In Motion (RIM), the maker of the BlackBerry, is facing tough times after service failures and a fall in its market value.

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But it may not be too late for RIM to save itself by developing truly next-generation handsets and building on its success in countries such as the UAE. Unlike in the US, where BlackBerry handsets are rapidly losing market share to Apple iPhones and smartphones running Google's Android software, BlackBerrys are still popular in the Middle East in general and the UAE in particular.

RIM was a smartphone pioneer with the first mobile phones to offer easy and convenient access to email. Its free BlackBerry Messenger (BBM) also appealed to younger users. But increased competition from Apple's iPhone range and Android smartphones has diminished RIM's market share.

According to Bloomberg, the market now values RIM at less than the net value of its property, patents and other assets.

"RIM is having a tough time at the moment, and there is little sign of that relenting," says Tim Shepherd, a senior analyst at the research company Canalys.

"Its share has dropped dramatically in North America, and in Q3 2011, in the US, its largest market, its smartphone market share dropped below 10 per cent for the first time … RIM has not been quick to innovate and execute."

In particular, RIM has not delivered a true next-generation smartphone, referred to as a long-term evolution device. It has also been slow to deliver a truly competitive touch-screen smartphone without a keypad.

But if RIM can deliver a true next-generation handset early next year, it is in a position to consolidate its continued popularity in markets such as the Middle East.

"RIM saw good growth in [Europe, the Middle East and Africa] and [the Asia-Pacific], driven by the continued popularity of its BlackBerry Messenger service, with the Middle East, Africa and South East Asia all particular bright spots," says Mr Shepherd.

BlackBerry smartphones are particularly popular in the UAE, where high-end users comprise a growing professional class as well as consumers drawn to BBM.

"In the UAE, RIM saw another quarter of strong growth, up 181 per cent year on year in Q3 2011 to 1.4 million units, heavily driven by the popularity of BBM, but also aided by a positive brand image, largely untainted by RIM's detractors in the US," says Mr Shepherd.

According to Canalys, BlackBerry smartphones are still seen by many in the Middle East as a status symbol, making the brand aspirational. A substantial professional workforce in cities such as Dubai also fuels a rapidly growing demand from businesses for secure and capable smartphones.

"This is not a scenario unique to the UAE," Mr Shepherd adds. "There are similar pictures seen in other markets in the Middle East and Africa and in markets in South East Asia - but it differs substantially from the US-centric western view of RIM or BlackBerry as a company and a brand facing big challenges to compete."

There is also a growing view that the meteoric success of smartphones running Google's Android software will not continue indefinitely. Android has wide appeal to electronics manufacturers such as HTC in the same way PC makers once flocked to Microsoft Windows. But this quick success may come at a high price for Google. Not only is it galvanising other players in the smartphone market into developing better smartphones, it is also forcing some operators to consider favouring manufacturers such as RIM in order to prevent Android having too much leverage.

"The more successful Android becomes, the more competition it will face. Operators and handset makers will encourage and support Apple, Microsoft, RIM, and even Nokia if it ensures that their revenues are not at risk," says Ian Fogg, an analyst at Forrester Research.

But with some Wall Street analysts now referring to RIM as "a wounded puppy", the Canadian smartphone maker cannot afford to lose its grip in locations such as Dubai and Abu Dhabi where it is still popular.

According to Mr Shepherd: "Consumers in the UAE also want the latest competitive products, and to be able to engage with fresh and exciting content."

One challenge the BlackBerry faces is to try to match the thousands of new services or "applications" that are now available on Apple's iPhone and for handsets using Goggle's Android software.

"RIM will come under mounting pressure to improve its offerings and differentiate its products," says Mr Shepherd. "Here too it will need to increase the pace of innovation and execution and deliver new, fresh and exciting products to the market if it is to continue to attract UAE consumers and see sustained growth in the longer term."

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