The Rise and Fall [and Rise Again?] of BlackBerry

The Rise and Fall [and Rise Again?] of BlackBerry

It was 1999 when Research In Motion (RIM) first imprinted itself in the world of electronic communication. When the company reached its peak it was difficult to imagine that an innovative company such as RIM would sit idly by watching the market change. RIM’s lack of innovation compared to its competitors is what caused its dramatic fall. Now, here we are, with the BlackBerry 10.

The Rise of RIM

Nearly 30 years ago two young engineering students, Mike Lazaridis and Douglas Fregin, co-founded RIM. The company began as an electronics and computer science consulting business in Waterloo, but would then shift its focus towards the transmission of wireless data. RIM would become one of the first companies to develop wireless data technology in North America.

With RIM’s rising success in the late 1990’s, the company went public and began trading on the TSX. Shortly after, RIM introduced the first wireless handheld computer signing agreements with several wireless Internet providers. RIM was ranked as one of Canada’s fastest-growing technology companies.

Patent Infringement, Competition, and the Fall of RIM

Late 2001 gave rise to patent litigation that would last nearly five years. NTP Inc., holder of numerous patents for wireless email technology, filed a lawsuit in a U.S. Federal Court. NTP accused RIM of patent infringement and was awarded $23.1M in damages. An injunction was also granted which banned the sales of BlackBerry in the U.S. On appeal, the Court upheld RIM’s patent infringement.

In 2006, a settlement was reached which saw RIM agree to pay NTP $612.5M for a “perpetual, fully paid-up licence going forward.” This licence essentially allowed RIM to continue selling its products and services without any further payments to NTP.

Irrespective of the patent infringement lawsuit which arguably stifled RIM’s growth, 2007 saw RIM deemed the most valuable company in Canada with over 12 million subscribers and shares that rose over 150% from the beginning of the year. Ironically, one of RIM’s most successful years also saw the emergence of the competitor that would be responsible for its decline: Apple's iPhone.

The iPhone achieved immediate success. Its operating system was innovative, touchscreen technology novel, and application software (app) unparalleled. RIM’s slow and inadequate responses with the BlackBerry Storm, Torch, and PlayBook, were not only met with disappointment, they saw RIM’s 20% global market share plummet to below 10% by 2011. To make matters worse, RIM’s lack of innovation also made it vulnerable to other competitors such as Samsung, Nokia and HTC. Currently in a distant fifth place, RIM (now BlackBerry) holds a global market share of less than 4%.

The Rise Again?

Now that BlackBerry has released its new touchscreen smartphone (Z10) the main question is, will this smartphone be any different? Opinions will vary; however, the general consensus is that the Z10 is comparable in performance to other high-end smartphones on the market today. Not only does the Z10 technology allow for easy navigation through its operating system, BlackBerry has realized that hardware should not be the only consideration. BlackBerry has put considerable efforts into bolstering its apps and ensuring the top four U.S. mobile carriers will sell BlackBerry smartphones. One can speculate that the company might have all the right pieces together to compete.

On the other hand, many analysts feel that while the Z10 may help BlackBerry in the short-term, the company’s problems are too deeply rooted. Analysts feel that BlackBerry will continue to contend with two main problems:

1) BlackBerry’s dominance of the “company phone” market will be a non-factor. Companies have stopped purchasing smartphones for their staff and are allowing their employees to select their own devices. Home Depot being the most recent company to do so causing BlackBerry share prices to drop slightly; and

2) BlackBerry will struggle to appeal to mainstream customers. Current BlackBerry users will likely purchase the Z10; however, the company’s long-term success will depend on its ability to take the market share away from its competitors.

An issue not often discussed is the stigma BlackBerry has instilled upon itself of being an inferior smartphone. BlackBerry’s repeated failures coupled with its competitors cult followings makes BlackBerry’s road to increasing its market share a difficult one. Only time will tell if the smartphone world holds a place for BlackBerry.

Danny Titolo is a JD Candidate at Osgoode Hall Law School.