Prediction: Microsoft to buy RIM in 2012

Jan 04, 2012

Table of contents:

1. RIM’s early success
2. The iPhone revolution
3. BlackBerry and Microsoft’s failed innovation
4. Microsoft and RIM’s continued “partnership”
5. Why Microsoft should acquire RIM?

2011 was yet another remarkable year in the smartphone industry. Both Apple and Android gained considerable market share at the expense of BlackBerry and Windows Mobile, and left the two incumbants with almost an impossible hill to climb. Apple and Android have set a new benchmark for the smartphone industry and have left the previous leaders in their wake. Arguably, both Microsoft and RIM have lost the consumer market battle. I believe that, Microsoft needs to acquire RIM in order to create a new, stronger challenge for the Enterprise market and stave off competition from Apple and Android.

RIM’s early success

It was Research In Motion’s (RIM) early innovation that really created the smartphone industry. Back in 1999, RIM developed the technology that allowed email to be delivered to mobile devices. The early days of this fledgling industry were dominated by RIM’s range of BlackBerry smartphones, and could be seen in the hands of any respectably business person or executive. RIM’s BlackBerry really set the bar for mobile productivity and their suite of backend software, including BlackBerry Enterprise Server, allowed large organisations to manage every aspect of their employee’s mobile devices. RIM were on the cusp of the technology wave and brought together the hardware and software that allowed huge companies to effectively manage their employee communication.

The iPhone revolution

When the iPhone launched, it was publically dismissed as a product set for failure. But the iPhone really took off as the consumer smartphone adoption rate began to rise significantly. The iPhone and phones running the Android operating system offered email on the go as well as a wide range of consumer utilities and “application markets”. Still RIM publically boasted that iPhones and Android phones were no match for their BlackBerry devices that had arguably a much better way of handeling email, better battery life and higher security.

iPhones and Android phones were aimed at the consumer market, and so were deemed inadequate for the enterprise market. However over the coming years, the rate of improvement verses the needs and requirements of the enterprise market quickly intersected, in such a way that it could of come straight off the page of Clayton Christensen’s, The Innovators Dilemma. Whilst iPhones and Android phones improved their core technology, application markets quickly found favour with their users. BlackBerry’s App World, whilst still in active use, has been left for dead by the App Store and Google’s App Market.

BlackBerry and Microsoft’s failed innovation

As the rise of the iPhone and Android based phones become ever more apparent, both Microsoft and RIM finally looked to fight back.

First Microsoft overhauled their Windows Mobile software and released version 7. Although Windows Mobile 7 incorporated a daring new user interface and strong integration with current Windows software and their XBOX products, they have failed to win significant market share. Only time will tell to see if they continue fighting to stay in the smartphone market.

RIM have also been fighting a losing battle with their BlackBerry range. First there was the BlackBerry Torch, the first BlackBerry smartphone to run the new BlackBerry 6 operating system. The BlackBerry Torch boasted both a full QWERTY keyboard and a touch screen and aimed to include more of the multimedia and consumer aspects that were evident in the iPhone and Android based operating systems. However the Torch ended up being a mismatched phone that couldn’t decide if it was touchscreen of keyboard orientated. RIM clearly wanted to preserve their keyboard targeted audience, but also tried to attack the touchscreen audience with the same phone. By trying to do both within the same piece of hardware, BlackBerry failed on both fronts.

The second big failure was the BlackBerry PlayBook. Years after the launch of the iPad, RIM finally managed to release a tablet device. Whilst being a respectable piece of hardware, RIM managed to ship a half baked operating system and another set of half baked visions for the product. The device could only be used if you already had a BlackBerry smartphone due to the lack of a native email client and no built in 3G technology. The BlackBerry App World had a pathetic amount of PlayBook applications and the only selling point that BlackBerry could differ it’s product by was the fact that it ran Adobe Flash. The spectacular failure of the BlackBerry PlayBook is evident in the huge loss RIM has made on the product and the abundance of stock that they cannot shift. The PlayBook was a desperate attempt to grab a piece of a new market. The long list of failures of the PlayBook and the mismanagement by RIM is far to big for this article, but it clearly was a huge mis-step for the former giant.

Despite the disappointments of the BlackBerry Torch and the BlackBerry PlayBook, RIM were determined to continue fighting. In 2011, they announced they were to be releasing 7 new smartphones on the new BlackBerry operating system, yet continue to lose market share month over month.

Microsoft and RIM’s continued “partnership”

It is in both Microsoft and RIM’s interest to continue creating hardware and software that work well together. BlackBerry smartphones can natively open Microsoft Office documents, and they integrate well with Microsoft Exchange and Outlook. It is this strong integration that is really keeping BlackBerry alive. Microsoft continues to have a huge grip on the enterprise software market, Microsoft Office is still the most adopted productivity package available and the huge switching costs means that it is unlikley to change for the forseeble future.

Why Microsoft should acquire RIM?

Microsoft are one of the only companies that could possibly acquire RIM. RIM is still a profitable company, and is not near death’s door just yet. But why would Microsoft want to acquire RIM? Well, Micosoft is already too far behind in the consumer market. Windows Mobile 7 has been a failure, and the rate at which the iPhone and Android phones are growing means that Microsoft is highly unlikely to change that. Microsoft continue to have a monolopoly in the enterprise software market and could use RIM as a way to further integrate an entire solution into some of the largest companies in the world. RIM’s partnership with Microsoft is keeping the company on life support, but it could soon be completely killed if the iPhone and Android rate of improvement continues. Microsoft and RIM need each other. Microsoft has the resources to make a significant attack on the industry, and RIM are ripe for an acquisition.