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August 11, 2010
RIM’s short-lived arm wrestling with the UAE and Saudi governments at the beginning of this month (see my previous entry, RIM’s Confrontation with the UAE Could Spell Disaster) showcases RIM’s obsession with upholding its reputation for providing secure communication over its devices. However, this obsession could end up blindsiding RIM and lead it to miss the boat in the region and, even more critically, at a global level. Instead of entrenching, RIM should pay more attention to alternative selling points that are more aligned with shifting smartphone market needs.
RIM’s traditional wisdom was that the security of communication over its devices is the main driver for its success and its main competitive advantage. This has worked well in an era where smartphones were the exclusive possession of top managers and government employees. A major shift in market dynamics and regulatory roadblocks, however, means that the vendor should consider evaluating this traditional wisdom.
Increasing 3G service adoption, declining smartphone ASP, and proliferation of consumer-focused mobile applications have all contributed to phenomenal rise in smartphone uptake. By the end of 2009, Pyramid Research estimates that smartphones to have contributed 15% to total handset unit sales, up from 6% in 2006. We expect the proliferation of smartphones to become even more pronounced, reaching over 50% of total handset unit sales by 2015. The strong growth in uptake means that the smartphone market, traditionally driven by business demand, is being quickly dominated by demand from the consumer segment.
Historically, RIM has done very well securing a commanding market share in developed markets with its enterprise solution. By year-end 2009, RIM’s market share reached over 19% of total smartphone shipments. The strong uptake in the consumer segment seems to have caught RIM off guard, leading to a decline in RIM’s share of global smartphone market, from 21% in Q1 2009 to about 19% in Q1 2010.
While the enterprise and government segments were very keen on RIM’s promise of secure and encrypted communication, the consumer segment is more in tune with a flashy design, a rich user interface, a beaming app store and a diversity of price points. RIM has done modestly well trying to diversify its product line by introducing the smaller and cheaper Pearl, the touchscreen Storm and lately the dual-pad Torch. However, RIM’s declining market share indicates that these initiatives haven’t gone as far as the company had hoped in extending its target market.
RIM’s conservatism is understandable. Replacement buyers make up over 55% of RIM’s handset sales. However, as the consumer and dual-use segment contribution to RIM’s base increases, so does these segment’s contribution to replacement sales. Most alarming to RIM, this threat is already knocking at its door: An August 2010 Nielsen study found that about 12 million BlackBerry users in America alone would consider switching to another smartphone brand and that about 30% of BlackBerry’s users globally would switch to the iPhone.
Since we are only days after the launch of the Torch, RIM’s latest device, it is very unlikely that we’ll see any major product launches over the next couple of months. RIM will most likely want to sit back and hope that the Torch turn out to be a major hit. However, RIM will have to face the music sooner or later. When all is said and done, the company will realize that it has to chose between keeping its current strategy of conservatism, hence turning into a niche player, or hop on a higher growth curve by retuning its strategy and becoming more aggressive in the market.
RIM’s best course of action is a two-pronged strategy, with one focused on the top end of the enterprise market, while the other aggressively targets the dual-use and pure consumer base. This strategy will most likely eat up some of RIM’s higher-than-average ASP. However, a declining ASP across the market is highly contagious, and RIM will have to deal with that reality either proactively or reactively.
— Badii Kechiche, Associate Manager
Related resources:
Mobile Data Forecasts
Forecasts published quarterly
Our Mobile Handset Forecast products provide a complete picture of handset sell-through. The Excel output includes five years of historical data and five years of market projections for metrics such as total handset sales, handset sales by network technology, new handset sales (by technology, by technology generation, by feature set), smartphone handset sales, vendor market share and handset ASP. We believe our Handset Forecasts are superior because they capture sell-through (units sold to end users) rather than unit shipments (sales from manufacturers to distributors) and rely heavily on our Mobile Demand Forecasts. Moreover, they are based on extensive field research, and a consistent methodology that is applied to all markets. Data from these Forecasts is available online for subscribers to our Data Tracker service.
Fixed Communications Forecasts
Forecasts published quarterly
Our Fixed Communications Forecast products provide a complete picture of wireline voice and data communications. The Excel output includes five years of historical data and five years of market projections for metrics such as demographics and economic trends, penetration of broadband and narrowband lines, Internet users, business users, voice telephony lines, VoIP, PCs, IPTV and revenue. We believe our Fixed Communications Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets. Data from these Forecasts is available online for subscribers to our Data Tracker service.
Mobile Handset Forecasts
Forecasts published quarterly
Our Mobile Handset Forecast products provide a complete picture of handset sell-through. The Excel output includes five years of historical data and five years of market projections for metrics such as total handset sales, handset sales by network technology, new handset sales (by technology, by technology generation, by feature set), smartphone handset sales, vendor market share and handset ASP. We believe our Handset Forecasts are superior because they capture sell-through (units sold to end users) rather than unit shipments (sales from manufacturers to distributors) and rely heavily on our Mobile Demand Forecasts. Moreover, they are based on extensive field research, and a consistent methodology that is applied to all markets. Data from these Forecasts is available online for subscribers to our Data Tracker service.
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Pyramid Points
