RIM Is No Palm But Is in Trouble. Here's the 7 Step Escape Route

Last Updated Aug 17, 2010 8:50 PM EDT

The new BlackBerry Torch smartphone from RIM (RIMM) already has problems as retailers cut its price in half, less than a week after its introduction. That's not good given that the Torch was supposed to be the "best" BlackBerry ever and the company's answer to both Google (GOOG) Android and Apple's (AAPL) iPhone.

Comparisons to Palm have already begun because the vaunted new model just doesn't have the competitive chops to reestablish the company's smartphone market dominance in the U.S. (An award to Fortune for the most creative headline: "BlackBerry Torch: The Palm Pre-berry?")

But just because observers call the end of the game doesn't mean the final score is fixed. RIM is far healthier than Palm and its potential is higher. The company just needs a strategy to position itself more effectively. Here are some suggestions.

First, everyone at RIM will have to avoid cheerleading and yet understand in a coldhearted way just how much better off the company is than Palm was. Tough situations are far easier to manage when you know things aren't hopeless. Look at some of the business basics from last quarter's earnings statement and numbers from Google Finance:

  • Year-over-year quarterly revenue grew by 24 percent.
  • Year-over-year quarterly smartphone unit shipments grew by 43 percent.
  • Service subscriber base grew by about 60 percent.
  • Gross margins were up to 45.4 percent from 43.6 percent in the same quarter last year.
  • Sales, marketing, and administration costs were down, but R&D was up.
  • Net income was up 26 cents per share, year over year.
  • There is $1.85 billion in cash and cash equivalents and another nearly $500 million in short term investments.
  • The company paid off billions in long-term debt last year and now apparently has zero.
  • Cash from operating activities was about $1.12 billion, with net cash in at $299 million.
That doesn't mean to embrace complacency. Conditions could quickly change. However, the company's financial position is strong, which means that it has the time to examine and improve strategy, which Palm didn't have. (Palm's big problem was shrinking business and a cash flow that would have left it broke inside 12 months.)

Some people have suggested what I would consider fire sale remedies for the company, such as dropping its operating system in favor of adopting Android or licensing BlackBerry to others. I don't think any of that is necessary yet. RIM can still come out with a winning strategy, though that will likely require the company to redefine success from "beat Android and iPhone" to "find the right market and have a valuable and sustainable business":

  • Get software optimization, stat! -- Check comments to this piece by Boy Genius Report and you'll see complaints about the plodding response of the device. If you're going to compete things have to be fast, so take just a little of that cash and hire some software superstars who can fix the user experience.
  • Get fast hardware, even statter. -- There is no reason that a company can't get fast components and a smart design in a smartphone. Too many are doing it already. If RIM can't manage this itself, it might consider contracting out to a company like HTC. The point is to do what's necessary to make customers happy, not to gratify not-invented-here ego.
  • Define your market. -- RIM had a lead for all those years because it could deliver something to the corporate market. Yes, Android and iOS are making roads into the enterprise because people get them in a consumer frame of mind and then want to use them in business. However, clearly BlackBerrys have offered something for corporate users that even now isn't broadly available from competitors. Focus on that. Maybe it ends up being a smaller market, but if it's strong, robust, and profitable, who cares? Don't get distracted by personal ego.
  • Look to your services. -- One of the things that corporate users liked was the ability to tie into business email. So what other services could RIM provide that would be right up the business ally? I'd say video meetings, calendaring, the ability to support an external keyboard for longer document writing ... in short, let the device become a real mobile workstation.
  • Tablet now, please. -- As we've seen, much of the interest in tablets has come from people who also want to use them for work. A colleague of mine recently mentioned that he has fun with his iPad, but he still needs to bring a netbook with him when traveling on business because he has to write. Make it possible for businesspeople to do what their jobs require. Although I say "tablet," it could be that a smartphone with a slightly larger screen and ability to accommodate a keyboard and even mouse might do.
  • Hire some stronger marketers. -- Improving advertising and marketing won't help on the product front directly. But once there is a smarter set of offerings, the company will need to sell them. RIM has been underwhelming in this area.
  • Emphasize security. -- In the last few weeks, both Android and iPhone have been heavily dinged for security problems. What has RIM's problem been? It's too secure for some countries in the Middle East and Southeast Asia. Why isn't the company capitalizing on that? Right, back to the last point -- get better marketing. When the world drops lemons in your lap, make lemonade. When it's gold, for heaven's sake, head to the bank.
The really big lesson, though, is that analysts, pundits, and the press all want to define success -- being the biggest one in the playground.

Related:

Image: RGBStock.com user vivekchugh, site standard license.
  • Erik Sherman On Twitter» On Facebook»

    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.