Steep pricing may hurt BlackBerry

Mumbai: Seven years ago, CrackBerry, a term used to underscore the thumb-typing addiction to BlackBerry smartphones, found its way into the Webster’s New World College Dictionary, a measure of the success that Research in Motion Ltd (RIM) achieved on the back of companies swearing by the security its devices provided.

Much has changed since, especially in the past couple of years, with companies allowing their employees to bring their own devices.

In 2013 so far, BlackBerry’s marketshare has dropped to less than 7%. This in a year when smartphone shipments are expected to surpass those of feature phones by accounting for 52.2% of all mobile phone shipments worldwide, according to a 4 June forecast by research firm International Data Corp. (IDC).

Google Inc.’s Android and Apple Inc.’s iOS are ranked the No.1 and No. 2 smartphone operating systems (OS) worldwide, respectively, accounting for 92.3% of all smartphone shipments in the March quarter. Windows Phone crept past BlackBerry for the third place, according to an earlier report, IDC Worldwide Quarterly Mobile Phone Tracker, released on 16 May.

RIM’s India business has historically given it plenty of reason to cheer. For instance, in the December quarter of 2011, RIM had a marketshare of about 15% when the smartphone base was around one million, according to research firm Convergence Catalyst.

But in the past 18 months, RIM, or BlackBerry as it now calls itself pending shareholder approval in July, has lost significant market share in India, too, and with it, also two country heads—Freny Bawa in November 2011 and Sunil Dutt this May.

RIM’s India share is currently below 2%, though on a base of around 15 million smartphones, according to Jayanth Kolla, founder and partner of Convergence Catalyst.

“While BlackBerry was at third spot during 1H2012 (January-June), Sony Mobiles displaced the former if we examine numbers for the full CY (calendar year) 2012,” CyberMedia Research (CMR) said in a 1 April media statement.

According to IDC India, which is yet to release the March-quarter results, the BlackBerry OS had a 4% marketshare in India in the December quarter. Android had a 79% share while Windows Phone (the Nokia Lumia range) had 6% and iOS, 5%.

Among phone makers, Samsung Electronics (India) Pvt. Ltd led the market with a 33% share, followed by Micromax and Sony with 13% and 10%, respectively, IDC India said. Most of these devices employ the Android OS.

The drop in BlackBerry’s marketshare in India is reflected in the decline in RIM’s global revenue for fiscal 2013, which, at $11.1 billion, was down almost 40% from $18.4 billion in the previous year. Revenue contribution from Asia-Pacific (which includes India) fell from 14.5% in fiscal 2012 to 14% in the year ended March.

RIM is now banking on the launch of new devices—such as the Z10 (touch phone) and Q10 (with a physical keyboard) based on its new BB10 platform, and the Q5—a colourful, lower-priced smartphone slated to be launched in October—to regain some of its lost glory in the Indian smartphone segment under the leadership of its new India managing director Sunil Lalvani.

“Yes. We have lost marketshare,” acknowledged Lalvani in an interview on Friday, but contested the sub-2% marketshare figure and pegged it to be around 8%.

“Marketshare is a bit misleading since we do not have phones in the sub-$100 segment, which makes some of our competitors’ marketshare seem large. Besides, we do agree that it took us time to transition from the BB7 platform (over a decade old) globally to the BB10 one, which we developed grounds-up. This took us time. But the response to Z10 globally and in India has been good,” he said.

Analysts, however, reiterate that the company’s steep pricing will be its undoing in a market that is not only price-sensitive but is being flooded with cheap, yet feature-rich, smartphones from its rivals. Z10 is RIM’s touch phone while Q10 revives the company’s popular QWERTY keyboard. Both are priced above Rs.40,000 while the Q5’s price is yet to be disclosed.

Prasanto Kumar Roy, editorial and research adviser at CMR Publications, believes the “Q10 is outstanding” but “at this price-point, most people—even BB loyalists—will not buy a phone with a keyboard, and especially not a BlackBerry. At the Rs.45k (Rs.45,000) level, buyers expect the iPhone—or something seriously “cooler” or different—with a large, multi-touch screen.”

“BlackBerry Q10, with the BlackBerry’s signature QWERTY keyboard, is a welcome option for many loyalists. However, in India, the device will face significant competition from the flagship models of other leading brands such as Samsung, Apple and HTC,” said Kolla of Convergence Catalyst.

The pricing of BB10 devices is a downer even for BlackBerry loyalists, agreed Manasi Yadav, senior market analyst in the client devices team at IDC India. “India is a price-sensitive market and for companies, it remains a volume game,” she said.

The success of BB10 in India, said Kolla, will depend on BlackBerry expanding the portfolio with multiple device models in the affordable range of $150-300 (Rs.8,500-16,000).

Lalvani does not entirely subscribe to this view.

“We do not want to play in all price segments. India is one of the markets that will continue to have both BB7 and BB10 devices. While the Q5, when launched, will be priced lower (did not disclose any figure), there’s always a market for premium models such as the Z10 and Q10,” Lalvani said, adding, “We are not just a handset maker any longer. We are also into services such as the BB enterprise server (BES) and BB messenger (BBM)”.

RIM’s hardware, as on 31 March, accounted for 60% of its business compared with 75% from a year ago. The contribution of services increased in percentage terms from 22.1% in fiscal 2012 to 35.3% in fiscal 2013, but decreased in value from $4.1 million to $3.9 million. This implies a steady move towards services.

In fiscal 2013, RIM launched BES-10—its enterprise mobility management solution that brings together device management, security and mobile applications management for existing BB smartphones, BB PlayBook tablets and new BB10 smartphones.

The service also provides a single console for managing BlackBerry devices and devices running Android and iOS operating systems.

The company also launched BBM Voice, a free update that allows customers to make free voice calls to other BBM customers over a Wi-Fi connection. “And BBM will now be open for use on Android and iOS phones, too,” Lalvani said.

“We believe BlackBerry is positioning and growing as a solutions company with enterprise offerings such as BES-10, offering its leading IM (instant messenger) client/app BBM on other OSs...instead of just being a devices OEM (original equipment manufacturer),” agreed Kolla.

According to the 4 June IDC forecast, smartphone shipments are expected to grow 32.7% year-on-year in 2013, reaching 958.8 million units, up from 722.5 million units last year, and emerging markets (such as India) will account for 64.8% of all the smartphones shipped during 2013, up from 43.1% in 2010. BlackBerry, caution analysts, has to soon get its pricing act right and not just rely on services if it wants to partake of the smartphone success story in India.