Ruh Roh, RIM!

Better start stacking sandbags RIM. Better yet, start praying, because sandbags are generally ineffective and after the flood subsides you can’t recycle the bags because of poopy-matter they absorb. That’s actually true.

The WSJ felt it wasn’t too soon to run this:

What did one BlackBerry say to the other? Nothing. Nice that you’re honoring Steve Jobs’ death with three days of silence.

RIM investors have been dumping their shares driving RIM down over 83% off its 2008 high. Though they have a healthy balance sheet and will for a while, RIM’s exiting the business of being profitable, accelerating toward the red. If the trend of the past four quarters persists they will either be reporting very weak earnings if not a loss for their final quarter. A few quarters later, red for the trailing twelve months and a few more, red in the annual report for a fiscal year. Here, look:

What prompted me to write this is was not last week’s badass outage. I was checking out my favorite indicator of what’s selling and what ain’t in order to stock up on more ammo to rip on the WP crowd. Fresh data for the week shows that Blackberry sales have fallen off a cliff. For example, throughout the beginning of September, the delta value (change) in monthly active users per day was +1.2M. Middle of September, drops from 1.2M to 871K. Last chunk of September, 521K and from 9/30 through Friday all the way down to 85K. No need to plot that out on a chart for you, it looks just like the orange line in the chart above. Though this athlete delivers the gist if you’re not into charts.

Maybe you’re thinking that that lull is anomalous and due to the white iPhone 4S fervor and will bounce back soon. All right, that’s certainly true that many iPhone 4S owners were recently Blackberry devotees, but during that last crash Android had a 60% surge in how many more new monthly active Facebook users using the Android app during the period in which Blackberry dropped a staggering 84%. Windows Phone did not take a hit either – just Blackberry.

Actually, speaking of Windows Phone, news of their overtaking RIM in sales is no longer out of sight, if you buy this Facebook metric at least, with their change in monthly active users spiking up impressively, gunning for RIM. Congrats WinPho crowd. Between your slow but apparent general ascent and what’s been happening to Blackberry, you’re affirming an axiom I’d like to believe is true, that the better product will eventually win. Blackberry is a dog brand. Used to be king. You see that Blackberry logo button in that row of platform categories up top? Yeah, no one clicks on it. They click on WinPho though. I’m probably not even going to catch heat for writing this article as the last of just a couple guys to read this site on a Blackberry today read how to tether with WP7. The other guy read about how to get an iPhone 4S from Best Buy. Wait, got one more Blackberry surfer checking out the Plane Finder for WP7 app review.

One of RIM’s biggest assets is that many businesses still force their employees to use Blackberries but because so many people would rather carry a single and better phone with better services and better everything, that phone being an iPhone or an Android, there has been a lot of pressure on these companies to cave and go BYOD (bring your own device). According to the Business Insider, 63% of businesses are BYOD and climbing. And ditching BES-only doesn’t mean ditching security features altogether – check out Apple‘s and Google‘s.

Another asset of RIM has been the reluctance of its users to bail on them, but because they left the market of satisfying consumers rather than just companies wide open, the natives have become restless and BYOD is growing less and less sacrilege. Even banks, not the first sector you’d expect to do this, are heading toward iPhones and iPads including Morgan Stanley, Bank of America, Citigroup and RBS. The other banks are watching. And everyone is watching them. Slow avalanche now but the rate at which the snow is melting is accelerating is fast, also partly due to an increasingly large clump of IT policy-writers being satisfied with the security and remote management systems offered by Google and Apple. Let me quote one of those guys:

In most ways, iOS is at least as secure as Blackberry, namely in malware prevention, exploit prevention and so on… [Blackberry is still superior in data encryption and manageability], but reliability obviously is a problem for Blackberry.”

He’s talking about RIM’s BES, the expensive server you buy your Exchange-running IT department and pay them to rig the thing up to the other servers and backup batteries, toss it in the racks, so that companies can watch everything employees do on the phone and their location, even non-company email accounts, and be the only ones with such capabilities. Companies really like that, what the BES delivers. But earlier this year, though at first they displayed some balls, not only did RIM cave to Middle Eastern governments’ pressure to be able to spy on not just BIS but BES communication, with the UAE managing to push spyware to RIM phones in the form of an OS update, so that reputation of bulletproof BES security has weakened somewhat with the cloud in general going in the other direction.

Moreover, last week’s four day global email failure managed to affect BES communications, not just personal accounts routed through BIS. That left a lot of people who thought they knew how BES communication worked, that it would be insulated from Canadian snafus, scratching their heads (while not being able to work), underscoring for them that the perks of a type of phone which nobody wants actually does have points of failure within RIM’s infrastructure. Which is unnerving not just because of outage vulnerability but because you thought the whole point of the BES was to fly cleanly beneath the radar, not reliant on anything but a data connection and an encryption key. Even if whatever precipitated BES failures had nothing to do with actual BES email flying through RIM, many may be spooked into thinking that it’s possible, that all the resources that go into a BES operation may not be worth both the schlep and denying employees including the top suits, not just the rank and file, what they want.

Another thing that may spook them is an upcoming annual report and ensuing stock drop that I bet will be characterized using language like bloodbath. They just had a bad quarter and I’ll be stunned if this one isn’t going to be much worse. What good is RIM’s security if their security as a solid, profitable company is called into question much more loudly that it already has been. Hang on, interruption — I just got an email from a client who’s about to jump ship to an iPhone, one of a increasingly large handful of people I know who’ve been pushed over that ledge. Helped my brother with his new iPhone yesterday, he loves it. I bet you’ve noticed an increasing flow of Blackberry defections in your own circles. Anecdotal, I know, but I think out loud when I write.

This outage kicked RIM in the teeth at the worst possible timing and it won’t be shrugged off by consumers. About 80% of RIM’s revenue is device sales, so no one wanting to buy their devices, loyal Crackberry users bailing for good, is bad news for RIM whose net margin is sailing toward the red. Red, not unlike the red brain matter Travolta and Jackson, under the direction of Harvey Keitel, had to clean out of their car before Travolta’s wife Bonnie came home as she would not take kindly to the situation — that shade of clumpy, pulpy red. Blackberry is now a dog brand and I believe RIM will not be able to turn that around. Didn’t even need to bring up the Playbook to drive that home to you.

RIM, now would be a good time to send in The Wolf.

Doug Simmons