BES 10 Fragmentation Increases The Risk For RIM
Research in Motion’s (NASDAQ:RIMM) BB10 launch scheduled for the first quarter of 2013 could be marred by what looks like a complicated strategy the company seems to have adopted with the simultaneous launch of BlackBerry Enterprise Service 10 (not Server).
Several conflicting reports about the BES 10 later, RIM clarified things with a company official shedding more light on the BlackBerry Enterprise Server upgrade roadmap late last month. [1] From the looks of it, new BB10 devices will not be supported by the existing BlackBerry Enterprise Sever (BES) architecture. Instead, RIM plans to provide only one more update, the imminent BES 5.0.4, to the existing servers after which it is goodbye BES and welcome BDS. BDS, or BlackBerry Device Service, will be RIM’s new mobile device management (MDM) server for managing all BB10 devices including the Playbook. To be sure, RIM will still support BES 5 for the foreseeable future but it is clearly counting on organisations upgrading all their existing BB devices to the new BB10 ones.
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BES 10 Could Hasten Customer Migration
In addition to the BDS, RIM will also provide a Universal Device Service (UDS) for non-BlackBerry devices such as iOS and Android – a service that is already being shipped with the Mobile Fusion product. In fact, BES 10 is a logical next step for Mobile Fusion where all the different devices are brought together under one umbrella. This however means that exiting BB devices, the new BB10 devices and the non-BB devices will require separate services. To RIM’s credit, it plans to release an upgrade for BES 10 in May that will merge UDS into BDS, reducing at least one hassle.
However, owing to their inherent architectural differences, BB10 and the existing crop of BB devices cannot be managed by the same server. This means that organizations that do not upgrade all of their devices to BB10 will need to run the existing BES server alongside BDS to support the older devices. RIM however plans to make IT management easier by providing a unified web-based console with BES 10.
Still, it is disappointing that the BB ecosystem will see this fragmentation between the current implementation of BES and the next-generation one. IT managers will now have a choice between upgrading to BB10 or migrating all of its users to other platforms such as Android or iOS, both of which would require the same effort seeing as many organizations already use third-party MDM tools to manage these devices. This puts all the more pressure on RIM to come up with a superior product in BB10, so that companies find it worthwhile to invest in a whole new architecture. A costlier and complicated installation process would not only result in fewer installations of the new servers but also cause a faster migration away from the BlackBerry platform.
With BlackBerry sales dropping off a cliff and RIM consequently becoming more dependent on its enterprises for its Push Email division, which constitutes 44% of our $12 price estimate for RIM, this could be a big blow to its turnaround plans.
Plummeting BlackBerry Sales
The struggling smartphone maker has seen its BlackBerry revenues fall year-over-year for the last four consecutive quarters. Last quarter saw RIM shipping only 7.8 million smartphones, a precipitous drop of 40% y-o-y and 30% sequentially. Consequently, RIM’s revenues from the BlackBerry smartphone division have declined by more than 50% y-o-y from around $3.8 billion to about $1.7 billion last quarter. The BB7 smartphones that were launched late last year aren’t doing well in developed markets, where more customers are switching to iPhones and Android-based smartphones. Meanwhile, emerging markets, where entry-level smartphones have sold relatively well, are subject to pricing pressures from competitors.
RIM is currently hoping that the launch of new BB10 devices early next year will help it stem market share losses and compete better with smartphone rivals Apple and Samsung. However, with the BB10 OS launch delayed by almost a year to Q1 2013, RIM will be subject to even greater competitive pressures as the iPhone 5 has been launched and a slew of Windows Phone 8 and improved Android smartphones will also be making their way out between now and then. Further, with RIM’s consumer appeal falling and the BYOD movement taking over, RIM cannot afford to jeopardize its relationship with enterprises, which have been one of its primary drivers of revenues from day one.
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