Joseph Palenchar On Feb 11 2013 - 1:00am

Analysts: BlackBerry Facing Tough Battle

NEW YORK — BlackBerry, the company formerly known as Research In Motion, has improved the odds that it will survive in the competitive smartphone market with the launch of its BlackBerry 10 OS, most analysts said. But no one is predicting success yet.

President/CEO Thorsten Heins likewise acknowledged that his beleaguered company has a long way to go to regain its luster and market share. “Today is the starting line,” he said here during the Z10’s launch event. But he appeared optimistic. “Today is a new day in the history of BlackBerry.”

The old days saw BlackBerry’s market share in global smartphone shipments peak in 2009 at 20 percent and fall to 5 percent in 2012, marking the company’s lowest level since 2003, Strategy Analytics said. The downsized company reported three consecutive quarterly net losses until its fiscal third quarter ending Dec. 1, when it posted net income of $9 million — but only as a result of a onetime $226 million income-tax benefit.

With the BlackBerry 10 launch, analysts said the company has narrowed the quality gap with the iPhone and premium Android phones, but more needs to be done for the company to remain viable and achieve a realistic goal of becoming a strong No. 3 operating system after iOS and Android.

To compete with major smartphone players, “Black- Berry will need to execute every part of its playbook perfectly during the next 12 months,” said Ian Fogg, senior principal analyst for IHS. “If BlackBerry fails in any phase, it will be ‘game over’ for the company’s comeback story.”

Microsoft’s stumbles in gaining smartphone share, and carriers’ desire to break up the smartphone duopoly between Apple and Samsung, will help BlackBerry in its efforts to become a strong numberthree OS, Fogg said.

“The company needs operators to support its marketing efforts and to communicate that BlackBerry 10 is not just another brand, but a genuinely differentiated product from the scores of Android smartphones,” Fogg contended. Carriers “greatly desire alternatives to the current smartphone market leaders,” he continued. “Further concentration of the smartphone market would weaken the position of operators with those smartphone leaders in negotiations over sourcing devices or in ensuring that operators’ content and communication services products are not bypassed by smartphone software.”

As for Microsoft’s tribulations in the smartphone market, he said, “Two years after the platform’s big relaunch, Microsoft has repeatedly failed to establish Windows Phone as the third mobile ecosystem that operators desire.” In addition, Microsoft hasn’t leveraged its strength in enterprise software from its Microsoft Office and server product lines to drive Windows Phone adoption in the enterprise, opening up opportunities for BlackBerry 10, he said.

The new operating system and phones “increase the chances that BlackBerry can regain some of its lost market share during the make-or-break year of 2013,” Fogg said. “However, in order to claim the title as the smartphone market’s third ecosystem after Google and Apple — a distinction now being pursued by a range of competitors — BlackBerry needs to bring its ‘A game’ in all areas. These areas range from differentiating its products to offering compelling and reliable smartphone devices, to securing broad operator support, to creating a complete software ecosystem.”

BlackBerry “appears to have scored some early points” in differentiating its products with the OS’s communications-centric BlackBerry Flow and Peek user interfaces,” he said. “With BlackBerry 10, apps like LinkedIn, Twitter, Facebook and others are part of a single flowing experience, rather than the separate apps of iPhone or Android,” he explained.

BlackBerry 10 “will appeal to the significant number of consumers that are yet to adopt smartphones because they are unmotivated by current entertainment and Internet apps but are instead communicationscentric,” Fogg noted. “This focus on communications also will go a long way to winning back ex-BlackBerry owners,” he added.

These and other features means that “this is the first time in years where someone buying a BlackBerry need not fear ridicule from someone with a Samsung Galaxy whatever,” said Avi Greengart of Current Analysis.

The new phones and those to follow won’t propel BlackBerry back to the No. 1 smartphone share that it unneconce enjoyed, Greengart agreed. What BlackBerry 10 must do for the company is reverse the company’s subscriber declines and return the company to profitable growth as a third smartphone platform next to alongside Apple and Google, he said.

The goal of BlackBerry’s next wave of phones in the second half, said Neil Mawston of Strategy Analytics, “should be to deliver significantly improved devices and services that offer something tangibly different and that have the potential to overtake Apple, Samsung or Nokia’s products.” However, he continued, “even that is going to be an enormous challenge. It may be too late. [BlackBerry] cannot compete with the depth and breadth of Apple and Google’s mature ecosystems, so it needs to convince some consumers that the unique communication-and-task-centric philosophy is enough for them to buy a Z10 instead of an iPhone or Android phone. Some of that hinges on [BlackBerry’s] marketing, which I have not seen yet.”

Informa analyst Malik Saadi quantified success for BlackBerry. The company “should aim to sell 1 million units of the new device in the first quarter after its launch,” he said. “Anything below this would call into question the company’s ability to execute its marketing strategy while anything above 3 million units would be a spectacular performance, which will undoubtedly resurrect both the consumers’ and the investors’ confidence in the BlackBerry brand.”

Jan Dawson, Ovum’s chief telecoms analyst, is pessimistic about BlackBerry’s chances in the long run.

“We believe that much of the installed base in mature markets has delayed upgrading while BlackBerry 10 is pending, something that has unfortunately dragged on for far too long, thus lengthening the upgrade cycle and depressing results in the interim,” he said. “If BlackBerry 10 delivers, it should produce a nice fillip in RIM’s results in the first two quarters of 2013 at least as this pent-up demand finally meets supply. Longer term, [BlackBerry] will return to its recent patterns of decline.”

Although the new platform “should have significant appeal to existing users, we don’t expect it to win significant numbers of converts from other platforms,” he explained. “There is little in the new platform that suggests it will have the compelling apps, content stores, or the broader ecosystem that consumers have come to expect in a competitive smartphone platform.”

Ovum doesn’t expect a quick end to BlackBerry. “With no debt, 80 million subscribers and profitability in the black in at least some recent quarters, the company can continue in this vein for years. But its glory days are past, and it is only a matter of time before it reaches a natural end.”