As Research In Motion restored its BlackBerry service Thursday after a four-day outage, analysts warned that the Waterloo, Ont.-based company's missteps are piling up and that unless it halts its decline soon, it will get left behind in the increasingly competitive wireless market.
Even RIM's co-CEO Mike Lazaridis admitted the company had let its customers down and "did not deliver."
"You expect better from us," he said in a video statement posted on RIM's website.
The network failure is only the latest in the company's woes. This past year, it has suffered from lacklustre product launches, including its new tablet device, the PlayBook, which has not attracted many customers. The launch of its new music subscription service also fell flat and its signature product, the BlackBerry, is facing increasingly stiff competition from Apple and Android smartphones.
"What's happened[with the email outage] is an irritant," says Ken Dulaney, a Silicon Valley-based analyst with Gartner, a global technology research company. "The main problem RIM is facing right now is the loss of interest in some of their devices."
Financial picture grim
The slump in performance has pushed RIM shares down about 65 per cent since the beginning of the year, from a high in mid-February of $69.30 on the TSX to a close of $24.12 on Thursday. The latest quarter was the first that showed problems for growth year over year, says Peter Misek, a New York-based telecoms and technology analyst for Jeffries, a securities and investment banking firm.
"The brand is taking a beating right now," he said. "The financial performance has begun to sag, and the shares have anticipated that it's going to sag much more."
According to a survey by London-based Brand Finance, published in September, the BlackBerry brand was worth 24 per cent less in September than in January.
This week's outage creates even more headaches for RIM's brand image, said Neil Bearse, the associate director of marketing at the Queen's University business school.
"If they're marketing to business customers, leveraging their network as being a differentiating factor from Apple, and now the prevailing sentiment in the market is that that network has problems, they're certainly going to have to shift their marketing focus elsewhere, at least in the short term, to start talking about a few other features.
"Keeping data private and secure is one thing, but an outage is something a business just can't deal with."
An added blow to RIM's image is the fact that the BlackBerry messenger and internet network conked out as the world media was still touting Steve Jobs, the late CEO of RIM's main competitor, Apple, as a visionary innovator who developed life-altering devices like the iPhone.
"The juxtaposition between those two is something that will really stick in consumers' minds," Bearse said. "The next time a business contract is coming up, they're going to remember all those emails that came through to IT saying, 'This thing just doesn't work.'"
All of this doesn't necessarily mean the company has to abandon the BlackBerry brand, says Bearse. Rather, he suggested it must return to the essence of what the brand meant in the first place and refocus on its core business users rather than expanding out into new product areas.
"It's more a matter of strengthening the BlackBerry brand, repairing it and almost saying, 'We're going back to the BlackBerry that you fell in love with. We're going back to that BlackBerry that you trusted for 10 years, that delivered your email every single day, that you wore your thumbs out typing on. Back to the BlackBerry that you trusted, and we're going to reinvent ourselves into that trusted name again'."
But part of that reinvention should be improving the BlackBerry's touchscreen user interface, says Dulaney.
"They've been trying to take an interface that was great for the early 2000s that doesn't work anymore when people can get iPhones and Android devices," he said.
The Astonishing Tribe (TAT), a Swedish firm that designs user interface software that RIM bought last year, could go a long way to helping RIM design a more compelling touch screen if its developers are given a free hand to truly design something new, Dulaney said.
Was the outage a blessing or a curse? Take our survey.
"That company has skills that could compete with Apple and Android, but the question I have is, 'Will [CEOs]
Jim Balsillie and Mike Lazaridis give them the freedom to take everything that's there, get rid of it and start afresh to really come up with a compelling user interface?'"
For other analysts, like Misek, there is no point in fixing anything on the device before first changing its operating system, which currently limits how much screen size, processing ability and browsing capability the BlackBerry has.
"Without a new operating system, they really are stuck," he said.
A new operating system is on the way thanks to RIM's acquisition last year of the Ottawa-base company QNX, but it couldn't come fast enough for Misek.
The network outage shows "they need to make this transition to QNX as fast as possible," he said. "Without that transition, it's going be very difficult for them to continue to be major player."
Shake-up at top needed, some say
Most analysts predict that BlackBerry will be able to survive the recent crisis. But they disagree on whether the company needs to make changes at the management level in order to push the company forward and ensure it remains competitive in the smartphone market.
Bearse says that while the company probably does need to make some personnel changes, now is not the time to do it.
Others think that after the year RIM has had — and the way it handled this recent crisis — a shakeup at the top or a straight-up takeover by another company is just what the company needs.
Many criticized RIM's management for their handling of this latest crisis, saying they were not proactive and transparent enough in keeping BlackBerry users informed about the nature and seriousness of network failure and how long it might last.
"Uncertainty boils over into anger, and then you have the potential of losing you biggest brand evangelists in the market," says Bearse.
Ultimately, even with the restoration of service and financial compensation for customers, RIM might lose those users anyway, he said.
"Unless somehow RIM can miraculously turn the ship around," he said, "and have a series of great innovations and incredible headlines about how innovative they are, and how reliable they are, and how secure they are, and how they've really fixed everything up, it's going to be a gradual degradation of its user base."