BlackBerry 10's debut critical for research in motion

Ottawa, Ontario: Research in Motion's introduction Wednesday of a new BlackBerry phone will be the most important event in the company's history since 1996, when its founders showed investors a small block of wood and promised that a phone shaped like that would change business forever.

Now with just 4.6 percent of the global market for smartphones in 2012, according to IDC, RIM long ago exchanged dominance for survival mode. On Wednesday, the company will introduce a new line of smartphones called the BlackBerry 10 and an operating system of the same name that Thorsten Heins, the president and chief executive of RIM, says will restore the company to glory.

But Frank Mersch, who became one of RIM's earliest investors after seeing the block of wood, is far less excited by what he sees this time around.

"You're in a very, very competitive market and you're not the leader," Mersch, now the chairman and a vice president at First Street Capital in Toronto, said of RIM. "You have to ask: 'At the end of the day are we really going to win?' I personally think the jury's out on that."

The main elements of the new phones and their operating system are already well-known. Heins and other executives at RIM have been demonstrating the units for months to a variety of audiences. App developers received prototype versions as far back as last spring.

While analysts and app developers may be divided about the future of RIM, there is a consensus that BlackBerry 10, which arrives more than year behind schedule, was worth the wait.

Initially RIM will release two variations of the BlackBerry 10, one a touch-screen model that resembles many other phones now on the market. The other model is a hybrid with a keyboard similar to those now found on current BlackBerrys as well as a small touch screen.

The real revolution, though, may be in the software that manages a person's business and personal information. It is clearly designed with an eye toward retaining and, more important, luring back, corporate users.

Corporate and government information technology managers will be able to segregate business-related apps and data on BlackBerry 10 handsets from users' personal material through a system known as BlackBerry Balance. It will enable an IT manager to, among other things, remotely wipe corporate data from fired employees' phones while leaving the newly jobless workers' personal photos, emails, music and apps untouched. The system can also block users from forwarding or copying information from the work side of the phone.

Messages generated by email, Twitter, Facebook, instant messaging and LinkedIn accounts are automatically consolidated into a single inbox that RIM calls BlackBerry Hub.

Charles Golvin, an analyst with Forrester Research called the new phones "beautiful" and described the operating system as "a giant leap forward" from RIM's current operating system. Ray Sharma, who followed RIM's glory years as a financial analyst but who now runs XMG Studio, a mobile games developer in Toronto, has been similarly impressed.

But both men are among many analysts who question the ability of BlackBerry 10, whatever its merits, to revive RIM's fallen fortunes.

"If it's good, it will help inspire the upgrade cycle," Sharma said. "But it has to be great in order to inspire touch-screen users to come back. If it's good, not great, I will be concerned."

Golvin was more blunt.

"They'll need to prove themselves in the face of a simultaneous onslaught of marketing from Microsoft, not to mention the continued push from Apple plus Google and its Android partners," he wrote. "This is a gargantuan challenge for a company of RIM's size."

In the year since he took over from the founders, Jim Balsillie and Mike Lazaridis, Heins has certainly remade RIM. He cut 5,000 jobs in a program to reduce operating costs by about $1 billion a year. Along the way, he also replaced RIM's senior management and straightened out its balance sheet. While unprofitable, RIM remains debt-free and holds $2.9 billion in cash.

With BlackBerry 10, RIM not only started over with its operating system, it also rebuilt the company through acquisitions. Its core operating system comes from QNX Software Systems, and the design of the user interface is largely the work of the Astonishing Tribe in Sweden, while other main components, like the touch-screen technology, comes from smaller companies that are now part of RIM.

Integrating all of those acquisitions, many analysts and former RIM employees say, added to the delays that plagued BlackBerry 10.

Now that the new phones are finally here, Heins is counting on RIM's remaining base of 79 million users globally to eagerly upgrade. But where those customers reside may be as important in their numbers in determining the success of that plan.

In the United States, which leads the world in setting smartphone trends, about 11 million BlackBerry users switched to other phones between 2009 and the middle of last year, according to an analysis by Horace Dediu on Asymco, a wireless industry blog he founded.

Until the final months of 2012, RIM continued to increase its subscriber base through sales of low-cost handsets in less-developed countries like Nigeria and Indonesia. Although BlackBerry 10 will be made available worldwide, the initial phones will be far too expensive for a large majority of BlackBerry fans in those regions.

RIM may also have confused its loyalists, particularly in North America and Europe, in the run-up to the BlackBerry 10 debut. Many of those users stuck with BlackBerrys because of their physical keyboards. But public demonstrations and early advertising for BlackBerry 10 were entirely centered on the touch-screen-only version and its virtual keyboard.

While some corporations have remained loyal to BlackBerry, often for security reasons, RIM not only has to sell them on the new handsets, it also must persuade them to upgrade server software to accommodate the new operating system, a costly and time-consuming process. Companies whose employees continue to use older BlackBerrys will have to run two separate BlackBerry servers.

Heins' pitch to those corporations is that the new BlackBerry 10 server software will also allow them to manage and control data on employees' Android phones and iPhones. But any corporation or government organization that allows those phones to connect with its systems long ago installed mobile device management software from other companies, including Good Technology and SAP. RIM is likely to find that the competition in device management software is as severe as it is in the handset business.