What Happened to Blackberry? RIM reports 10% decline in smartphone unit sales for Q2? Decline? This year?

The wheels ARE coming off RIM's aspirations in smartphones. In Q3 of 2009 the Canadian Blackberry maker rached its peak in market share at 21%. And while its market share erosion since had been steady, but slight and gradual (about 1 market share point per quarter loss, down to 14% market share in Q1 of 2011) the total number of Blackberry smartphones had still be growing every single quarter up to now.

RIM RESULTS

So we have RIM quarterly results that were out last week. Now, for the first time we hear RIM reporting a decline in Blackberry unit sales from Q1 to Q2. A decline of 10 percent in unit sales, down from 14.5 million Blackberries in the previous quarter, to 13.3 million now. RIM's market share was 14% last quarter, and by my early projections for full Q2 smartphone sales of about 107 million units, RIM's market share has now dropped to 12%.

The market share decline can be 'understood' by RIM's particular niche focus in two specialist segments that fit its products and services - the business/enterprise customer segment and the youth/texting segment. These were 'early adopter' segments and their proportion of all smartphones was disproportionately large early on in smarpthones, and as more and more 'normal' people get smartphones, their relative size will of course shrink. But the overall smartphone market is growing strongly this year (anywhere from 50% to 75% growth year-on-year) so RIM should be benefitting from the fact that the total market is growing.

It is not. In fact RIM is seeing a massive rejection of its product now. If the market grew by about 5% and Blackberry sales declined from the previous quarter by 10%, it means Blackberry lost a total of 15% of its natural customer base. What was once a highly addictive user base and loyal customer base for Blackberry, seems to be abandoning the brand.

WHERE NOKIA WINDFALL BENEFIT?

And where are all those 'disgruntled' Nokia-Symbian clients, who used Nokia QWERTY phones like the E-Series? We know from Nokia's own statements that Nokia smartphone sales are collapsing right now. In fact we hear from the sales channel that Nokia is effectively in boycott, the resellers refuse to sell Nokia-Symbian smartphones. So, a customer walks into a store, asks for a Nokia QWERTY phone like an E-Series and the sales guy says they don't stock that model, but sells then what? Another QWERTY phone of course.

Why are these not translating into Blackberry sales?

I calculated in the February blog about the preliminary numbers of the Nokia Bonus 2011 Windfall Gift customer give-away of premium Nokia Symbian customers, to be roughly 50 million in size this year. I also said that the four smartphone makers to gain most ouf of the Nokia give-away were Samsung, Apple, RIM and HTC. So RIM is a 'natural' beneficiary of the 2011 Nokia customer give-away (much more so, than for example Motorola or HP/Palm for example). I estimated that for the full year 2011, from February, RIM should gain a bonus of about 6 million Blackberry smartphones this full year, or about 1.5 million per quarter.

Think for a moment. If you are heavily addicted SMS text messaging user, and have had a Nokia E-Series or another Nokia QWERTY phone, then you will not naturally want a pure touch screen phone. The Apple iPhone for example is not the natural 'replacement' but a Blackberry would be. And roughly speaking, about a fifth of Nokia's smartphones have been in the business/enterprise and youth segments, mostly QWERTY based smartphones.

But more than that, the two customer segments MOST likely to 'instantly' learn about Symbian being obsolete, and instantly wanting to switch away from Nokia Symbian phones, are not elderly people or family users or camera buffs etc. The users who are most dependent on the phone for business, are those who really need the phone for business - like travelling salespeople for example - and those most addicted to the phone - the youth segment. The enterprise/business user will not be deciding on which smartphone operating systems the employer will be supporting in its IT department and which brands of smartphones the employees are allowed to buy. Those decisions are made by the employer. And if the company had already been 'sold' on how great Nokia E-Series is - which in many ways was a Nokia business unit set to mimick Blackberry - isn't the natural home of that customer, if they no longer want Nokia Symbian - to be Blackberry then? No?

And if the other instantly aware customer segment, who know smartphones the best and consume them the most (and all services on them) ie the youth segment and young adults - if anyone in that segment was buying the Nokia consumer oriented smarpthones with QWERTY keyboards - isn't for them also the natural alternative specifically the Blackberry?

We do know that Nokia smartphone sales are plummetting worldwide. Those customers walked into the phone stores intending to buy a smartphone with a likely preference that it would be Nokia. They didn't buy Nokia because of the reseller boycott. But their need to have a new smartphone did not disappear. So they did walk out of the store with something else? Some will have gone from Nokia to the iPhone, I am sure, but those would mostly be the type of customer who is not addicted to SMS/messaging and didn't have an E-Series or other Nokia QWERTY phone. So what then? Androids, Samsungs, HTC's. But really, no Blackberries?

This is the golden age of smartphones. Blackberry is one of the most recognized, iconic, established brands with a high loyalty in its target segments. Why is it failing now? This is a mystery. And where are those customers going?

If we count a Q2 Nokia shortfall of about 10 million Nokia-Symbian smartphone sales decline from Q1 in total, and now add Blackberry losing another 1 million sales, we already are 'in a hole' the size of 11 million. And Apple analysts are suggesting iPhone sales have declined from Q1 with the China bonus sales, especially because there is no new iPhone 5 for June, so they are expecting iPhone sales in the 15 million to 17 million levels. If we say that is 17 million, that would mean Apple branded smartphone sales would be down almost 2 million from their Q1 level. Now we have a total 'hole' the size of 13 million!

Who has all those sales? It can't be Android based smartphones on Samsung, HTC, SonyEricsson, LG and Motorola, because Google itself says Android activations are up yes, but only to 400,000 per day so their sales now is about 37 million. Thats only up about 2 million from Q1. Where are 11 million smartphones? Thats 10% of the total market now that is 'missing'

Samsung's bada may have some, but again, I am curious that Samsung hasn't yet announced their 10 million milestone. And it can't be Microsoft, the sales of its new WP7 operating system is so bad, that its biggest supporter, HTC announced they are shifting most of Microsoft phone production away from Microsoft and onto Android. In fact after the Microsoft purchase of Skype, all Microsoft based smarpthones are now also in reseller boycott by the carriers/operators who hate Skype. So the missing ten million smartphones are not in the Microsoft camp either. Where are they?

BUT RIM HAS PEAKED

So, that is a big mystery to me. I will seek to find out where our phones are, and why they are there. Maybe the whole market is now going through a correction and Q2 total smartphone unit sales are down from Q1? Because Apple's iPhone 5 is delayed and Nokia is collapsing and Blackberries also falling in sales, maybe there is a tiring of the smartphone hysteria and we see a 'correction'.

But the big early bombshell news in Year 2 of the Smartphones Bloodbath, is that Blackberry's unit sales have now peaked. I think its fair to say, it was not the iPhone that killed the Blackberry, as RIM managed to grow both unit sales and market share of the Blackeberry through the first two full years of the sales of iPhone. But once Android came along, Blackberry saw its market share peak in late 2009 and now in early 2011, we see Blackberry's unit sales to have peaked too. Their best quarter was 14.5 million Blackberry sales. Now they are in decline.

And they have the typical management 'solution' to the problem - they are firing staff. That may be good for the bottom line, but in this age of the strongest growth in smartphones ever, that is a very short-sighted move. Now is not the time to cut sales staff - Blackberry enterprise/corporate sales are long sales cycles. Now is not the time to cut Blackberry marketing because the increasing part of Blackberry sales are now to consumers where most sales are driven by marketing. Now is not the time to cut R&D, as this is the most creative, inventive and innovative time in smartphones.

I do think that the tablet PC market is in hype mode, and one where enormous R&D effort is needed to keep up with Apple's iPad and where very heavy insvestments can result in tiny gains in market share. I am afraid that Blackberry's tablet adventure is hurting them unnecessarily. But I am sure that most who own Blackberry shares and most who study the RIM strategy would think that RIM has to mimick Apple, so if Apple does a Tablet, so too must RIM...

But as RIM cuts staff, that will hurt its chances to claw back market share in smartphones this year. Their market share is now to approximately 12% and in severe decline. Two market share points to lose in one quarter is very dangerous in this industry and must be stopped very soon or we will soon start to think of the Blackberry as yet another dead phone brand in the style of the Palm and Microsoft Kin and Nokia Symbian..

Very poor quarterly results from RIM. Very bad performance in this bloody year of smartphones. To use boxing metaphors, RIM, a past champ has taken it on the chin and has fallen to the canvas and is facing a count. Blackberry is not yet out, but staggers up onto its feet feeling very wobbly. Of perhaps, to put it in ice hockey terms for our Canadian readers, its the Stanley Cup playoffs, you're in overtime in a game, and your team takes a penalty. Its not the end of the game yet, but this is the worst time to be playing one man short on the ice.

RIM needs to turn it around really fast for Q3. This is perilous indeed.

Comments

[simpleblob]

In my opinion, there are two likely scenarios

1. The demand for QWERTY phones declined

and/or

2. Customers (especially the youth section) switched to android and iPhone, seeing those as more fashionable or capable.

Optional 3., the effect of Whatsapp / iMessage app combo supplanting the current king -- BB messenger.

[Vikram]

"What Happened to Blackberry? RIM reports 10% decline in smartphone unit sales for Q2? Decline? This year?"

Answer: The same thing that happened to Nokia - a bad OS.

Blackberry OS, like Symbian OS (or MeeGo) is not competitive vs. iOS or Android.

Blackberry and Nokia OS's both have the bullet-point checklist features but the overall usability and organization is poor and lacking compared to iOS and Android. You can say Nokia has this and that feature before Apple or anyone till you are blue in the face else but Symbian was good in 2005, now it is awful and MeeGo couldn't deliver. Same with Blackberry - their 6.0 and 6.1 (or 7) OS is still behind iOS and Android regardless of all the specs that they list on paper.

Software drives the smartphone and you don't have to look very far as to why Blackberry and Nokia are both slumping to various or lesser degrees: It is the same reason for both - bad software.

[pk de cville]

You mention business and youth as being the ones abandoning BB in great numbers...

It seems to me many 1st adopters are going to the multitouch platforms found in Android and iOs.

I think the Android and iOs numbers this qtr will be unprecedented (due to RIM and Nokia collapsing with Msft/Skype being blackballed). The continued advance of the iPad which must be cannibalizing new BB purchases with some users holding on to their old BBs for another year).

[cycnus]

The market have switch to android with QWERTY such as Sony Erricson Xperia Pro.

I also would add something that BB OS is really outdated as of now, and that's why they try to switch to QNX ASAP. It's too bad they didn't see this coming earlier... just like nokia.

But... as of now... I believe it's already too late for BB to try QNX. WHY???
Because RIM solution of instant messaging (IM) is only closed for RIM.
When the market just started with no competition, this is a STRONG point to buy RIM product.
But, as of now, it's not a strong point anymore.

I can buy Symbian/WP7/Android/iOS and can chat inter-platform with other phone user with YM/Google/MSN/Skype/What's app.

It's a pitty a couple year back when nokia want to join BB in their IM, they refuse. Nokia would give RIM a great $$$ for selling their E-series devices with BB IM. Now, i don't think any company would care about BB PIN anymore.

I think if BB still want to exist, maybe they should be better using android (or WP7) or even SYMBIAN, rather than going from scratch with QNX.

[don_afrim@twitter]

Tomi you're making a big mistake here. I have always had Nokia, and for a long time a Nokia Qwerty phone until I recently switched to an iPhone 4. At first I also thought that because I was an Qwerty addict that I wouldn't like a touch screen. I swore on the Qwerty and never even considered a phone without Qwerty but you know what not only did I really enjoy the touch screen, I would even go as far as to say that I wouldn't go back to a Qwerty phone. Thinking back it's really a waste of space to me now. I write just as fast as before on landscape mode. I saved a lot of money too since iPhones have WhatsApp Messenger, its like BBM but also available on cross platforms.

So to your theory that ex-Nokia Qwerty clients would automatically switch to BB is in my eyes not valid anymore. It used to be like that but no longer since touch screens have become so accurate to touch input. It's not a Nokia style touch screen where you had to press multiple times for it to recognize your touch input.

[indy]

the decline is about to accelerate because
as you always said, Tommy
The one big selling factor BB had in emerging markets/texting teenagers was the BBM messaging (No SMS costs)
Apps like Whatsapp are spreading like fire and their user base grows exponentially (Its also cross-platform)
in Q3 iMessage will be launched combining the Apple marketing machine and loyal i-fans. this could finish BB altogether in less than a year.(or existing in a Vertu type niche market, hand made for rich male executives)

[gzost]

The collapse of Blackberries is not really all that mysterious. They are really strong in messaging, but other things have come into focus for a lot of customers. Smartphones today are expected to be multi-talents, and for that large touch-screens are best suited. With onscreen keyboards now at a point for most people where their use does not cause pain anymore, the hardware QWERTY argument becomes increasingly weaker. No, you can't really type blind on a touch screen, or with the phone held in your sleeve, but you have more space to play, surf, watch video, and operate custom touch interfaces for apps. It's a trade-off that more and more people are willing to make. In addition to Blackberry hardware increasingly going from a reason to buy to a reason not to buy, the platform has fallen into the apps hole even worse than Nokia. There are few apps, and new things never debut for Blackberry, and hardly ever make it there in the end. While I agree that apps are not (yet) a viable market for most developers, they are increasingly a draw for the young early adopters that were loyal Blackberry customers in many markets.

[cycnus]

in addition to my comment above...

SMS is now dirt cheap, and this make BB IM strong point weaken.

For example.
to have BB service here in indonesia cost between US$ 8 - US$ 15 / month.
but to have unlimited SMS cost less than US$ 3 /month.
...not to mention semi-unlimited internet starting from US$ 3* /month for NON-BB user such as symbian, android, iOS, WP7 user.
(*for US$ 3, got a 500MB internet, and speed will be lowered once hit 500MB).

BB is not majority, so the BB user would be use SMS too, to reply to non-BB user.
So, it's better to go full SMS, rather the combination of BB/SMS.

[Mikko Martikainen]

Other's have made really good points already, and I too believe that the market is changing fast and a physical qwerty keyboard is a necessity to less and less people today. It's just my gut feeling, though, we'd really need up to date research to see if the trend is indeed going down. I think you posted before that about 35% would not consider non-qwerty phones, do I have that right? But if qwerty is going down, that could explain at least part.

Another thing also mentioned is that the BB OS is really unsexy right now. However, QNX has the chrome, so to speak, so perhaps some people have decided to put their BB purchase on hold to see if they come up with a decent QNX phone (unlikely, given their public statements, but not everybody knows it.)

Yet one additional explanation to account for a small portion of the "hole" you calculated might be that some people forgo a smartphone purchase altogether and get a tablet instead. That's not going to be a big number, I agree, but if it were the case for 10% of tablet buyers that could explain around a million missing smartphones.

But, overall and once again, it's the software that makes or breaks a platform. There is a big shift underway, and regular people have a lot more power now than just a few years ago. That means that people buy what they want, not what's forced on them. You talk about the power that the carriers have over the market, and it is undoubtedly great, but the balance of power is shifting. It's no longer enough to be the sweetheart of the carriers, you have to win over the end users as well. And the converse is also more and more true: people are willing to go to great lengths to get the handset they desire, regardless of what the carriers offer. It seems that RIM is losing or already has lost both. It doesn't look good for them. I'm sure you've read this many times before, but it's still very relevant: http://mobileopportunity.blogspot.com/2010/10/whats-really-wrong-with-blackberry-and.html

[Will Finley]

Although you alluded to it, the channel has the power to sway market share from one brand to another. Heretofore, Apple and Blackberry where the only brands that could more or less control the channel. Apple continues to hold this power, but BB power over the channel has eroded due to the lack of pull from the market. Youths are abandoning BB because of limited functionality beyond messaging and the higher cost. Small and Medium Business will be the next to go (if they already have not) as BB contracts expire and users convert to more open systems. I would suggest that large corporations will be the only hold-out for the BB.

[Pablo]

RIM is on its way to being a software unit within another company.

They could probably pull off independence if they moved quickly to market BES to large email providers (Yahoo!, Google) and carriers. But management ego won't allow this, so the software side will be sold and the rest will go away.

Beware of CEO's, even very successful ones, who start trying to buy sports teams.

[PCB]

Where did Nokia sales go? Where did BlackBerry sales go? Where did 2million Apple costumers go.

The answear is: They are waiting for the new Nokia WP.

Could indicate sales of 20 million WP phones for NOKIA Q4 2011

[former n900 user]

I must agree with what others have already pointed out here. RIM is failing because of the exact same reasons as Nokia. The software can't compete anymore with the big ecosystems of Apple and Google. In contrast to RIM, Nokia has already understood, that they have no other choice but to make a dramatic shift or become obsolete in just a few years time.

It will be interesting to see, what RIM will do. As Nokia they have very limited options. I tend to agree with Pablo. RIM probably will get sacked. But hey, maybe they will also join the WP7 ecosystem ;-)

[former n900 user]

One more thing. I really enjoy reading your blog, because you have a very clear opinion of things and stand up to it, which I respect a lot. However, I am often astonished, that you almost NEVER take something like "consumer satisfaction" into account of your considerations. It's all about prices, carriers, anouncments, market share etc. These are important factors, but especially in the case of Nokia you totally ignore the fact, that the consumer satisfaction of Nokia smartphones has taken huge hits in the recent years. You just have to browse Nokia-forums or blogs. They are full of "NEVER-EVER-A-NOKIA-AGAIN" statements. This is definetly an important factor for the Nokia decline and another reason why their shift to WP7 was inevitable.

[Boris]

Well, one thing is sure - Galaxy SII's sales are huge, and Samsung can't manufacture them enough to satisfy huge demand, and it's not even released in many markets, like American. It's not only top sold smartphone in many markets, it's top sold mobile phone!

[JukkaM]

Mikko has something here, namely shift from a smartphone to tablet. I have read a few blogs where people have swapped their smartphone to Nokia or other dumbphone after getting an ipad. Even I got myself the first dumbphone for years after getting myself a dumbphone.

Who will be the first to create a dumbphone, which canfunction as a wifi hotspot, has a nice niche. Such phone would make a perfect companion for ipad and if it costed less than €100, the difference of 3g and wifi ipad, it would make economical sense to the consumer too.

[KPO'M]

Not only is RIM hampered by a bad os, their hardware is underpowered. Witness how the Bold 9900 was delayed so that they could retrofit a faster CPU. That requires engineering effort, not least of which to keep battery life acceptable. People are demanding things from their phones that the old generation of processors just can't handle.

[seo optimization]

Wow, this was a really great post! I enjoyed reading it and although each point was short and to the point...

[sexy bikini]

I always use NOKIA celphone as it was most convenient and duarable.

[kevin]

Tomi,
Last year when you predicted iPhone had peaked, I disagreed and predicted here that Nokia and RIM were fading instead. Both have come true; the numbers showed it then, and neither company has released a successful smartphone (in the class of iPhone and Android). In 4Q09, RIM peaked in annual sales growth at 19.6%. Where RIM had previously been growing and taking Nokia share, it had stopped by 4Q09. (With it's latest release, it should be down around 14% when 2Q results are released.) RIM continued increasing its unit sales (but at a rate less than the market) thruout 2010 but had to lower ASPs in order to do so. In RIM's case, it went overseas to increase unit sales of cheaper phones with lower ASPs. And in 2011, that strategy has now placed it squarely in Android's target market. So Apple drove RIM out of the perceived high-end, and Android is cleaning up at the lower-end of the smartphone market.

In sum, a shift has taken place. Most people in wealthier countries fundamentally no longer think QWERTY-based phones with half-sized screens with poor UI and poor app stores are true smartphones, because one can do and consume so much more (beyond messaging/SMS/MMS) with apps. So the number of people who still want these phones is rapidly shrinking, especially in the wealthier markets.

As for Apple, I think it will again increase its annual market share this quarter. Apple grew annual market share last quarter; it's now up to 16.7% from 16.0%. (Apple has never lost annual market share from quarter to quarter.) Apple still distributes via a relatively small but growing number of carriers. Apple has yet to see shrinking ASPs. Apple has a new model coming in less than 3 months.