The Torch is fizzling. Now what?

The Torch was Research In Motion's (RIMM) bid to return to the cutting edge of smartphones, a market that is at once a rare corner of the economy where consumers are eager to spend and perhaps the most intensely competitive in terms of tech innovation. Every few months, either Apple (AAPL) or Google (GOOG) announces some new improvement to their smartphones. Keeping up with them is all but impossible.

And that's not good news for Research In Motion. For years the company was the strongest brand in smartphones, thanks to the BlackBerry. The early generations of BlackBerrys were ubiquitous at business gatherings and airports, as their owners frenetically thumbed out emails on the go. Jokes about CrackBerrys grew so commonplace they became tiresome.

Then came the iPhone and the Android phones, with their touchscreens and their cornucopias of apps that could do things like edit movies on the fly, practice piano chords and even create works of art if you needed a break from those emails. But the BlackBerry clung to its advantages: Its signature keypad was much easier to type on than iPhone's touchscreen, and Verizon offered two-for-the-price of one deals to entice consumers.

Plummeting Market Share

That wasn't enough, however, to keep RIM's share of the U.S. smartphone market from falling to 28% in the second quarter, from 37% a year earlier. Verizon also sells Android phones, and Android's share of the smartphone market surged to 33% last quarter, displacing BlackBerry as the best-selling smartphone operating system. Half of BlackBerry owners surveyed by Nielsen were ready to jump to the iPhone or an Android phone.

But for that other half, BlackBerry loyalty remained strong. Many of them still preferred BlackBerrys for email. Just as important, most IT departments preferred supporting BlackBerrys over newer, perhaps less secure phones. Then iPhones and Android phones started to be adopted as ideal business phones. And social media became as important as email for many people.

So RIM began introducing touchscreens to keeps its customers happy. But it turned out many wanted touchscreens and the old tactile keypads, So RIM gave them that in the Torch -- it was designed to be the best of both worlds. Its BlackBerry 6 operating software would appeal to all the BlackBerry brand loyalists who wanted a slicker touchscreen and faster web browsing of iPhones and Android phones, plus the old familiar keyboard if you slid it out.

But the Torch isn't a game-changer the way the iPhone was, it's just another player in a game whose rules Apple -- and increasingly Google -- are writing. Its early sales were respectable: 150,000 in the first weekend of launch. That number is overshadowed by the 1.7 million iPhone 4s that sold in its first three days on the market.

Lukewarm Reception from Reviewers

That lukewarm reception was reflected in the reviews. "It's tough to feel really excited about the BlackBerry Torch and OS 6 after heavy testing," wrote Engadget. Gizmodo, an equally influential blog, was colder: "If you don't already own a BlackBerry, you will not want this phone. And if you do, you still might not want it."

The general assessment was this: Yes, the Torch has touchscreen features like pinch-to-zoom and an improved browser. But its software is slower and the 3.2 inch display is smaller than its peers. The Torch may be the best BlackBerry phone to date, but it isn't better than an iPhone or some Android phones.

Wall Street's reaction to the so-so sales had a stronger tone of disappointment. Goldman Sachs called a bunch of stores and found few sold out of the Torch, declaring the debut "underwhelming." Pacific Crest thought RIM was "entering into a downward margin spiral."JMP Securities downgraded the stock to market perform from outperform. Even when an analyst at MKM Partners issued a report arguing that RIM's sales in Latin America and Asia would remain strong, he cut his target on the stock to $69 from $75.

Perhaps the most dire forecast came from Bernstein's Pierre Ferragu, who focused on the speed with which corporate IT departments are abandoning BlackBerrys. People want to use their personal smartphones at work, and companies are noticing that letting them do that helps reduce their operating costs. There's not much RIM can do to reverse this trend, Ferragu concluded.

In other words, RIM's insistence on designing the BlackBerry as a business phone isn't working anymore. In fact, it's hurting RIM because smartphones designed for consumers are taking over. The weird thing is, as a consumer phone, the Torch is actually very good. But in the hyper-competitive smartphone market, very good isn't good enough anymore. You have to blow people away just to stay alive.

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23 Comments

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Sekinu2

The torch is hurt in so many ways. Its underpowered, its screen is too small, it constantly freezes like most BB. The rim os sucks big time and then its locked to AT&T the worse provider out there. Phones need to do alot more so if RIM wants to survive they better get on that idea of partnering with an android os and then integrate thier BES email and Ims to android

September 08 2010 at 7:27 PM Report abuse rate up rate down Reply
Fred

I can't tell people how much I dispise the iPhone touch screen for typing. It's really BAD and Apple apparently just won't listen to people. However, a smart phone is more than a keyboard and RIM has miles to go. Why can't I get the best of all worlds? Why must each device have its "best" features? Why can't I get them all on one?

September 08 2010 at 1:26 PM Report abuse rate up rate down Reply
Fred

I can't tell people how much I dispise the iPhone touch screen for typing. It's really BAD and Apple apparently just won't listen to people. However, a smart phone is more than a keyboard and RIM has miles to go. Why can't I get the best of all worlds? Why must each device have its "best" features? Why can't I get them all on one?

September 08 2010 at 1:26 PM Report abuse rate up rate down Reply
accutaxsearch1

RIM'S Major error was the exclusive offer thru ATT. It should have been available to other carriers especially to Verizon customers. Millions of AT&T customers had already boutht the iphone 4 so who else did they expect was left to buy their new device? If you are gonna change service to AT&T then you might as well get iphone, but if they offered it to other providers they would have had a better reception than what is now reported.

September 07 2010 at 5:44 PM Report abuse rate up rate down Reply
donut999

rimm touched $150 share middle of 08. the iphone ran $50 off their share price. the droid is about to run it down another $50 a share. no doubt either the iphone or droid in combo, or perhaps even another product will put them out of biz in the next 2 years. there are lovers of blackberry, but just not enough. it is a volume business. better sell your stock now no matter how painful it is. after the nov elections, the dow will probably be 8,500 or 11,250. wish i had a clue which one. either way, finally going to get back in buying only apple and google. they are slowly, scratch that, make it steadily taking over the world. iphone owners, don't dump att when the field finally opens up to new carriers. let everyone else make the change. att service will be swell and the new carriers will be overtaxed and start having loads of problems.

September 07 2010 at 4:50 PM Report abuse rate up rate down Reply
ds51282

I'm just the opposite, I like the torch, and unless Apple learns customer service and "sense of urgency", I'll never own another Apple product for any functions I have that are critical and need to stay up and working. I don't have a home phone, my only access is through my phone. If it stops working my business is dead. I can't afford to wait for 5-7 business days to get into an Apple Store for them to fix or send it in. For Apple, a non-working phone should be treated like a failed stock market system - get it up ASAP for the customer, reboot, repair or replace with lightning speed. when I'm at the hospital, I shudder when I see a doctor relying on an iphone for his critical paging, messages and phone. So far on my torch, every app starts/stops when I tell it to, doesn't orphan memory or require a reboot/reload, and hasn't damaged my contact list once! when I tilt it, it tilts immediately. So far kudos to RIM for what I consider a great tool that meets my critical business and personal needs.

September 07 2010 at 2:15 PM Report abuse +2 rate up rate down Reply
1 reply to ds51282's comment
Sekinu2

No one with a brain would use an iphone for business as the iphone is so limited in what it can do and if Steve Jobs doesnt approve it its not allowed. Why would you run a business without a landline option? landlines are so cheap and a must have as cell phones are great but not always reliable due to networks. the best phone out is the Evo hands down but never abandone a landline if your running a business makes no sense.

September 08 2010 at 7:31 PM Report abuse rate up rate down Reply
Brandi

I recently upgraded my iphone 3gs to the blackberry torch since i never had a crackberry and i totally regret it. I'm returning this wackberry and getting my iphone 4. Nothing can compare!

September 07 2010 at 1:04 PM Report abuse -2 rate up rate down Reply
1 reply to Brandi's comment
Sekinu2

Why would you go from an iphone to a BB thinking it was a forward move? Id skip that iphone 4 and get a good phone like the Evo 4G or Samsung Galaxy S. the iphone 4 sucks and doesnt do very much except play games plus its an AT&T network which blows

September 08 2010 at 7:33 PM Report abuse rate up rate down Reply
stramire76

Iphone 4, I will not touch anything else!! My entire family has iphones, even the ones that live overseas where there are better phns avaibale. All these manufatures are just jumping onbared espescially RIM, sorry RIM your way too late, I still see them selling the antiquated blackberry curve. lol

September 07 2010 at 12:26 PM Report abuse -2 rate up rate down Reply
gregmlr

Is this the new BlackBerry offered only at AT&T? THERE'S THE PROBLEM! AT&T is iPhone--end of story. If handset makers want their products to thrive they needn't sign exclusive deals with the wasteland known as AT&T.

September 07 2010 at 12:18 PM Report abuse +1 rate up rate down Reply
bethcshort

I am ready to buy the torch, but I cannot purchase it from Verizon?! How stupid is that for RIM and Verizon. Is that because Verizon is pushing the Droid and gets a bigger cut from Motorola? I love my blackberry, but would like a larger screen. I have used the iPhone and I prefer the blackberry.

September 07 2010 at 12:17 PM Report abuse +2 rate up rate down Reply