Bye Bye BlackBerry. How Long Will Apple Last?
This article was originally published in Forbes
Just five years ago, “BlackBerry” was virtually synonymous with “smartphones.” It was well on its way to becoming a generic trademark, like Kleenex or Band-Aid, that would seemingly forever be associated with its entire sector. “For many, the Blackberry is a must-have gadget, a wireless hand-held computer that can send e-mail and make phone calls,” noted a 2005 NPR story on the “CrackBerry,” as some BlackBerry addicts referred to the device. (Incidentally, the story compared the BlackBerry to the Palm Treo, an equally popular device at the time.)
Today, however, Research In MotionLtd. (RIM), the maker of BlackBerry smartphones, is a financial basket case that has come to symbolize just how turbulent life in the modern digital economy can be. On Thursday,RIM announced that it was laying off top execs as revenues continued to plummet and the firm’s stock price hit its lowest mark since 2003. Industry analysts are lowering their projections for the firm and wondering if any corporate suitor—Microsoft is commonly mentioned—might be willing to step in and save the day by taking over the company.
As a New York Times headline from earlier this year noted, “The BlackBerry [is] Trying to Avoid the Hall of Fallen Giants,” joining the infamous ranks of the Sony Walkman, the Palm Pilot, the Atari 2600 gaming console, and the Polaroid instant camera. The article noted that “Over the last year, RIM’s share price has plunged 75 percent. The company once commanded more than half of the American smartphone market. Today it has 10 percent.” Both metrics continue their downhill slide.
If RIM can’t pull a rabbit out of the hat, the BlackBerry will become the latest case study exemplifying just how fast “information empires” can rise and fall in today’s rapidly evolving information technology marketplace. I’ve devotednumerous installments of this column to documenting how Joseph Schumpeter’s “perennial gales of creative destruction” are blowing harder than ever in today’s tech economy and laying waste to those who don’t innovate fast enough.
Nowhere is that more true than in the mobile phone handset and operating system marketplace, which has undergone continuous change over the past 15 years and is still evolving rapidly. Like the BlackBerry, Palm smartphoneswere also wildly popular for a brief time and brought many innovations to the marketplace, but the company underwent many ownership and management changes and rapidly faded from the scene. After buying Palm in 2010, HP announced it would use its webOS platform in a variety of new products. That effort failed, however, and HP instead announced it would transition webOS to an open source software development mode.
Microsoft also had a huge lead in licensing its Windows Mobile OS to high-end smartphone handset makers until Apple and Android disrupted its business. It’s hard to believe now, but just a few years ago the idea of Apple or Googlebeing serious contenders in the smartphone business was greeted with derision, even scorn. Consider some of the pessimistic predictions that preceded Apple’s entry into the smartphone business:
- In December 2006, Palm CEO Ed Colligan summarily dismissed the idea that a traditional personal computing company could compete in the smartphone business. “We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in.”
- In January 2007, Microsoft CEO Steve Ballmer laughed off the prospect of an expensive smartphone without a keyboard having a chance in the marketplace as follows: “Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”
- In March 2007, computing industry pundit John C. Dvorak argued that “Apple should pull the plug on the iPhone” since “There is no likelihood that Apple can be successful in a business this competitive.” Dvorak believed the mobile handset business was already locked up by the era’s major players. “This is not an emerging business. In fact it’s gone so far that it’s in the process of consolidation with probably two players dominating everything, Nokia Corp. and Motorola Inc.”
This serves as a classic example of those with a static snapshot mentality disregarding the potential for new entry and technological disruption. Today, less than five years after these predictions were made, Nokia’s profits and market share have plummeted and a struggling Motorola was purchased by Google last summer. Meanwhile, Palm appears dead and Microsoft is struggling to win back all the market share it has lost to Apple and Google in this arena.
“The violence with which new platforms have displaced incumbent mobile vendor fortunes continues to surprise,” says wireless industry analyst Horace Dediu. He notes that Nokia’s Symbian platform went from 47% share to 16% in three years, Microsoft’s phone platforms went from 12% to 1%, RIM’s went from 17% to 12%, and other platforms went from 21% to zero. Meanwhile, over a two year period, Google’s Android OS went from zero to 48% and Apple’s iOS went from 2% to 19%.
In a marketplace this dynamic it’s worth asking: How long will it be before Apple and Google’s Android meet a similar fate? That question sounds ludicrous now considering their respective fortunes and current co-Kings of the Hill status. But posing the same question about BlackBerry just a few years ago would have also evoked howls of laughter.
No one is laughing now, however, especially not RIM execs or their shareholders.Comments