Does anybody else have the feeling that this week’s launch of BlackBerry 10 doesn’t really matter? It’s not for anything that Research In Motion is or isn’t doing with its long-awaited and overdue handsets, but rather because mobile devices are on their way to becoming commoditized.
With smartphones, it’s Google that’s driving the trend. As with virtually every area of its business, the company isn’t so interested in selling things to consumers as it is in getting them online and using its services, with the money coming from the ads it serves them that way. That’s why Google is selling the Nexus 4 in North America for $300 without a contract, while in the developing world it’s moving smartphones for just $50. It’s also why Android has more than three quarters of the world’s market share for smartphones. If Google knew the first thing about actually selling stuff to consumers, the constantly sold-out Nexus 4 would be an even bigger deal than it is.
Neither the Nexus 4 nor those African phones are as high powered as most of the “hero” devices being sold in advanced markets, but for many users, they’re good enough. With Google plying this very different agenda, smartphone prices have only one way to go: down.
That’s good for consumers as it will ultimately change the way phones are sold here in North America. Cheap handsets means consumers won’t need to sign on for subsidized contracts with carriers. And with no contracts to lock them in, carriers may actually be forced to give consumers better service and prices.
But it’s bad for phone makers. The healthy profit margins enjoyed so far by the likes of Samsung and especially Apple are coming under pressure, which is why there’s been so much chatter lately about the possibility of a cheaper iPhone.
Apple’s chief executive Tim Cook has tried to deflect such talk by saying he isn’t interested in “revenue for revenue’s sake,” yet the company’s previous actions speak volumes. Apple did launch the cheaper iPad Mini last year in response to pressure from Google and Amazon, who together set the new price agenda on that category with their own smaller and less expensive devices, the Nexus 7 and Kindle Fire, respectively.
Phones and tablets are inevitably following computers into commoditization. Apple may still charge a premium for its products, but it will ultimately have to settle for a relatively small market share as a result, just as it has in computers. There is also a limit to that premium—with the likes of Google and Amazon setting the pace, the respective days of $700 smartphones and $500 tablets are numbered.
Which brings us back to BlackBerry. With shrinking margins on the horizon, why would anyone want to be in the smartphone or tablet market? Monolithic conglomerates such as Google, Samsung and Apple can afford it because such devices are but two pieces of their much larger wholes—they can take a bath on phones and tablets since they pay off in other ways, like keeping people within their larger ecosystems.
For a much smaller, single-purpose player such as RIM (or Nokia), which don’t really have anything else to offer consumers, that low-margin future isn’t very appealing.
It’s no surprise, then, that RIM may be looking to pull an IBM, where it would sell off its hardware business to focus instead on software and services. It’s ironic that the same company involved in IBM’s computer spinoff nearly a decade ago—China’s Lenovo—is the latest potential dance partner to be attached to this idea. And it’s not just speculation; RIM CEO Thorstein Heins says he is considering doing exactly that.
The smartest thing currently going on at RIM is the development of BlackBerry Fusion, or the toolkit that lets businesses manage all the different phones being brought in by employees. This bring-your-own-device niche is one where RIM’s current competitors are unlikely to go—and it’s potentially a high-margin business, at that.
Put these trends together with Heins’s oddly timed comments about a potential hardware sale and it’s tough to get excited about this week’s BlackBerry 10 launch. It may just be a lot of sound and fury that ultimately won’t matter much, since RIM’s real interest—and future—lay elsewhere.