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RIM battles to ward off BlackBerry crumble





BLACKBERRY was one of the more surprising symbols of the riots that blighted London last summer.

BlackBerry Messenger, the instant messaging service which allows BlackBerry users to text each other for free, became one of the catalysts of the widespread looting and destruction as disenfranchised youths seized on the system to communicate when and where they should gather.

It was hardly the sort of press coverage that corporate giants dream of but it nonetheless shone a spotlight on one of the jewels in the crown of BlackBerry's struggling manufacturer, Research In Motion (RIM).

"BlackBerry Messenger was what kept RIM alive if I'm honest," said Roberta Cozza, research director at Gartner. "In emerging markets and in the UK, it was the reason why certain segments of the population, particularly the youth, bought BlackBerry handsets."

Now the spotlight is on BlackBerry Messenger again, with reports that RIM is considering focusing all its firepower on its messaging and email networks, and spinning off its handset division.

The potential split, which would turn the mobile manufacturer into a software company, has been called a "silly fantasy" by insiders, but it is hard to dismiss altogether, given the dire straits in which the Canadian firm finds itself.

RIM, whose devices accounted for one in every five mobile handsets sold in the first quarter of 2009, has struggled to keep step with increasing competition from Apple's iPhone and a panoply of devices based on Google's Android mobile operating system. Its share of the market sank to 7pc in the first three months of this year and will be closer to 3pc by 2016, analysts claim.

On Monday, RIM shares fell more than 7pc to below CAN$9.41 in Toronto – less than a third of their value last September, when they stood at $31.91, and nearly 94pc down from its high point in 2008. RIM's market capitalisation is now just 1pc of Apple's.

Analysts at Morgan Stanley were scathing. RIM is "essentially broken", they claimed, and the only way it will remain "a viable entity" is "at a fraction of its current size".

Whether or not RIM executives agree with them, there is no question that there is an urgent need for a shake-up.

Change started to come in January, of course, when BlackBerry's former "co-chief executives" Mike Lazaridis and Jim Balsillie stepped down, making way for Thorsten Heins, its former chief operating officer. Mr Heins quickly called in RBC Capital Markets and JP Morgan to help draw up plans to revive the company, in what was hailed by analysts as RIM's "last resort".

The options they have put on the table are thought to include splitting the business in two and either listing RIM's handset division as a separate entity, or flogging it altogether.

Facebook or Amazon have been tipped as potential buyers, although the appeal of the handset division will depend heavily on its portfolio of patents.

BlackBerry handsets might be prized for their security and their easy-to-use qwerty keyboard, but it has lost momentum as users defected to rivals that are sleeker and arguably quicker for browsing the web. The firm will break with tradition when it launches its first touch-screen, the BlackBerry 10, later this year, but many analysts fear the device will come as too little, too late.

Meanwhile, BlackBerry's once peerless reputation for security has also taken a hit, thanks to the damaging blackout of its internet, messaging and email services last autumn.

The outage, which affected users in Europe, the Middle East, India and Latin America, cost its customers billions of pounds worth of business but arguably cost RIM more in reputational damage.

One mobile chief predicted that the incident would "kill" BlackBerry once and for all. Whether he is right remains to be seen, but certainly it has lost a lot of its vitality.

In the three months to the end of December, RIM posted its first ever quarterly loss of $125m. It is expected to reveal further losses on Thursday, when it books a $1bn writedown on stockpiles of unsold smartphones and tablets.

Writedowns of that scale are impossible to sustain. RIM's future depends on BlackBerry 10, or its reinvention as a very different company altogether.