BUSINESS

BlackBerry's 'iPhone Killer' For Verizon Turned Into A Flop: Report

09/30/2013 12:22 EDT | Updated 09/30/2013 12:24 EDT
AP
Left to right, a BlackBerry Storm, BlackBerry Pearl Flip 8220, and a BlackBerry Bold 9000 are shown Tuesday, Nov. 18, 2008 in New York. (AP Photo/Frank Franklin II)

Verizon Wireless approached BlackBerry maker Research In Motion in 2007 to help them create an “iPhone killer” but BlackBerry failed to live up to the challenge, an investigative report in the Globe and Mail has found.

The news comes after Fairfax Financial last week offered $4.7 billion to buy BlackBerry, and after the company announced it had lost $965 million in the second quarter, with revenue declining a sharp 45 per cent.

It was the latest sign that the company’s BlackBerry 10 lines of phones has failed to turn the company’s fortunes around.

The Globe report suggests infighting among senior executives over which way BlackBerry should head in a world dominated by Apple’s iPhone had more than a little to do with the company’s decline.

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Evolution Of BlackBerry

Verizon Wireless, shut out of the iPhone market by Apple’s exclusive contract with AT&T, asked the company then known as Research In Motion back in June, 2007, to create an “iPhone killer,” the Globe reports.

RIM executives jumped at the chance,” the Globe reports. “At one management meeting, Mr. Balsillie called it RIM’s most important strategic opportunity since the launch of its two-way e-mail pager.”

But the end result — the BlackBerry Storm — came out in late 2008 after months of delays, “and wasn’t quite ready,” one company insider told the Globe.

After poor customer reviews, RIM discontinued the phone, and Verizon instead turned to Google, developer of the Android smartphone operating system, to help them create an “iPhone killer.”

The Globe reports: “Rather than hurt Apple, the Droid and other Android-powered phones began to steal share first from Palm and Microsoft, and then RIM. By December, 2010, Android’s market share in the U.S. had grown to 23.5 per cent from 5.2 per cent a year earlier, as RIM’s dropped by 10 points, to 31.6 per cent.”

Since that time, RIM’s market share has continued to fall. In a clear sign the company has effectively abandoned its ambitions as a manufacturer of consumer devices, the company announced earlier this month it will no longer market to consumers, but will focus on bulk sales to corporate clients.

By the Globe’s account, the abrupt change in leadership that took place at the top of RIM in 2012 was in no small part driven by infighting among executives.

One such rift involved the future shape of BlackBerry phones. Then co-CEO Mike Lazaridis argued against the company’s move to develop full-screen smartphones, saying the company had a differentiated product in a QWERTY keyboard BlackBerry, and not so with full-screen phones.

But incoming CEO Thorsten Heins moved ahead with the BlackBerry 10 launch this year, to less than impressive public reception.

Another internal conflict saw then-co-CEO Jim Balsillie push to refocus the company on instant messaging software. Inspired by the success of its BlackBerry Messenger Service, Balsillie wanted to create “SMS 2.0,” an instant messaging service superior to the current SMS system that would see the company earn money in texting fees. The idea was to open RIM’s software to other phone operating systems, such as Android and iOS, and build a subscription base on all phone platforms.

But co-CEO Mike Lazaridis and his replacement, Thorsten Heins, opposed the plan, preferring to focus on the development of new phones. When Heins cancelled the project shortly after taking RIM’s helm, Balsillie severed all ties with the company.

My reason for leaving the RIM board in March, 2012, was due to the company’s decision to cancel the BBM cross-platform strategy,” Balsillie told the Globe, in what were evidently his first comments on his departure from RIM.

BlackBerry returned to the “SMS 2.0” idea in a limited way, announcing this summer that its BBM service will be available on other phone platforms. But many analysts say the move is too little, too late.

BlackBerry had also mulled spinning off its messenger service as a separate company, though that was before Fairfax placed its bid for the entire company.

Read the whole Globe and Mail investigative report here.