The technology sector is a merciless market and there are few "fade into the sunset" stories. Instead, whenever and wherever there is success, a horde of rivals soon follow with the express intention of taking what you do best, doing it a little (or a lot) better and driving you out of business. The rise of Research In Motion (Nasdaq:RIMM) was unexpected and remarkable, virtually tethering a whole generation of workers to their jobs in a way never quite achieved before, but the fall has been just as remarkable. (For related reading, see Blackberry Continues Its Downward Motion.)

TUTORIAL: Stock-Picking Strategies

With the market having moved on from specialized one-function devices to do-everything smartphones, can Research In Motion adapt to and overcome the new competitive realities?

What Went Wrong
Like Palm before it and so many technology incumbents in general, Research In Motion rested on its laurels. Though the Blackberry had become a virtual must-have within any large organization, the company failed to think much outside of that narrowly-focused business market. It seems that management failed to grasp the importance of functions and features like music playback, Internet access, cameras and so on. So, while RIM dutifully continued to turn out slightly improved versions of older models, they were out-engineered and out-maneuvered by Apple (Nasdaq:AAPL) and the introduction of virtual do-everything devices.

Making matters worse, RIM has been slow to accept its shortcomings – particularly the extent to which it does (or does not) understand its customers' wants and needs. Where Apple has become famous for anticipating customer tastes, and Samsung adept at following, RIM has come off as quite a bit more clueless. Recent devices out of RIM have been panned as clunky, feature-poor and generally not what the market wants. The recent PlayBook tablet is perhaps the best example – though few companies outside of Apple, Samsung, Amazon (Nasdaq:AMZN) or Barnes & Noble (NYSE:BKS) have had much success with tablet-type devices, the PlayBook has been a near-disaster.

But that is not all that has bedeviled RIM. There have been inexcusable operational and execution errors as well. Service outages have earned the company ample bad publicity (and customer ire), and the dual CEO structure seems to be a sluggish, bureaucratic response to an industry that typically thrives on fast decision-making and clear visions from leadership. (To learn more about effective CEO leadership, read Top Qualities Of An Effective CEO.)

Can RIM Be Saved?
Is it all over for Research In Motion? Not necessarily. For starters, RIM still serves a growth industry. Although the overall phone market is not growing all that rapidly, smartphones are still well less than half of the phone market. Consequently, a good lineup of products could not only capture shares, but grow the smartphone market further.

Ironically, RIM may also be helped by one of the aspects of technology that led to its undoing. Apart from Apple, there is very little customer loyalty in technology. So long as a company doesn't put products out that are so bad as to destroy the brand name, users are happy to try something new if the price and feature set are right. In other words, RIM could be just one generation away from being relevant and competitive again.

Last and not least, turnarounds don't necessarily take all that long in this sector. Apple famously designed the iPhone virtually from scratch over 30 months and for approximately $150 million. Subsequent iterations have taken much less time to develop, and it is not as though RIM would have to start from scratch. Even granting that IP limits what RIM can do, with over $1 billion in cash on the balance sheet, development costs should not be a limiting factor.

What RIM Must Do
Perhaps it's counterintuitive, but if RIM wants a future, it has to forget the past. It needs to abandon legacy platforms and products that are no longer self-sustaining, and it needs to realize that it is now on the outside looking in when it comes to the industry leaders. Also, a healthy dose of humility must come – realizing that they have lost touch with their customers and fallen into the habit of telling consumers what they want instead of asking them.

It would also seem that the dual CEO structure has done the company no particular favors. As the oft-repeated joke about there being no statues erected to committees may suggest, real leadership does not come out of a consensus. RIM needs a single visionary leader with the ability to think ahead of the curve, the willingness to demand the almost-impossible and the full support of the board of directors. Said differently, there is little reason to believe that RIM can play the Samsung or HTC game of following design leaders but compensating with efficient execution, so RIM has to attempt to regain leadership in technology and design. (For related reading, see A Primer On Investing In The Tech Industry.)

The Bottom Line
With over $1 billion in cash on the books, Research In Motion will have many more shots on goal before the company is in serious risk of going away entirely. Although RIM does not have Nokia's (NYSE:NOK) remarkable world-wide share, the company does still have a foothold in the market and a brand that customers recognize.

Still, time is wasting and RIM's opportunity to rebound will not live forever. If the company can realize that past successes no longer mean anything to tomorrow's buyers and go back to the drawing board with fresh ideas, a comeback could be in the cards. Should RIM continue on its same stubborn path, though, it is likely to find itself too far behind the likes of Apple or Samsung to ever really be a growth story again. (Learn about Technology Sector Funds to get exposure to the sector as a whole.)

Related Articles
  1. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  2. Investing

    Playing The Decline of Traditional Broadcast Media

    Broadcast media is losing viewership as cord cutting by the younger generation triggers subscription losses at cable and satellite companies.
  3. Investing

    What's Better Facebook Moments or Google Photos ?

    Facebook and Google have both released new cloud-based photo sharing services. How good are they?
  4. Investing

    Will Facebook's New App Leave Siri in the Dust?

    Currently Facebook is testing its new super intelligent virtual assistant, known as, "M". Can this new AI on the block dethrone Apple's Siri?
  5. Investing News

    Apple and the Battle for Streaming Music

    Spotify, Apple, Youtube and Tidal are facing off for control of a vast market. What factors will determine who emerges as the leader in streaming music?
  6. Investing

    The Semiconductor Sector is On the Verge of a Breakout

    The semiconductor sector may be on the verge of a major breakout that provides market leadership in 2016.
  7. Chart Advisor

    These Technology Stocks are Rolling Over

    These technology looked to have topped out, and could be heading lower.
  8. Stock Analysis

    In Focus: Water Scarcity

    After a discussion, sponsored by CDP, we share the importance of water disclosure as it relates to businesses operating amid increasing water scarcity.
  9. Fundamental Analysis

    Analyzing Porter's Five Forces on Apple

    Evaluate Apple's position in the marketplace by looking at it through the perspective of the Porter Five Forces Model for industry analysis.
  10. Investing

    Most Valuable Career Skills in 2016

    Evaluating the mixture of technical skills and traditional "soft skills" that render career applicants competitive in the 2016 job market.
  1. What is the QQQ ETF?

    The PowerShares QQQ, previously known as the QQQQ, is a widely held and traded exchange-traded fund (ETF) that gives investors ... Read Full Answer >>
  2. Why does Warren Buffett largely avoid investing in the technology sector?

    Warren Buffett has often said that he avoids investing in the technology sector because he does not like to own stocks in ... Read Full Answer >>
  3. Why doesn't Warren Buffett own Apple (AAPL) stock?

    Warren Buffet claims he simply does not know how to properly evaluate Apple (AAPL) and does not feel confident in his reading ... Read Full Answer >>
  4. What economic factors influence corporate bond yields?

    The most telling signs that a tech stock is about to burst are no different from the signs of impending collapse of stocks ... Read Full Answer >>
  5. Which sectors have similar pros and cons to the drugs sector?

    In financial terms, the drug sector has a high level of risk and growth. It must gather a lot of up-front investment to drive ... Read Full Answer >>
  6. Does technology follow the law of diminishing marginal returns?

    The law of diminishing marginal returns does sometimes apply to the technology industry. The law states that as employee ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center