BlackBerry Loses Top Spot to Apple at Home: Corporate Canada

By Hugo Miller - Mar 23, 2012 3:21 AM GMT+0700

Canada’s love affair with the BlackBerry is waning.

Research In Motion Ltd. (RIM) has been ousted from the top spot for smartphone shipments in its home market for the first time, trailing Apple (AAPL) Inc.’s iPhone.

RIM, based in Waterloo, Ontario, shipped 2.08 million BlackBerrys last year in Canada, compared with 2.85 million units for Apple, data compiled by IDC and Bloomberg show. In 2010, the BlackBerry topped the iPhone by half a million, and in 2008, the year after the iPhone’s debut, RIM outsold Apple by almost five to one.

BlackBerry, one of the biggest consumer brands to emerge from Canada, had enjoyed more loyalty among locals who embraced its made-in-Canada roots. BlackBerry’s loss of domestic preeminence shows the iPhone’s user-friendly features and wealth of apps trump other considerations, said Paul Taylor, a fund manager at BMO Harris Private Banking in Toronto.

“For RIM, in its home market, to lose that No. 1 position to iPhone is strategically important,” said Taylor, who manages about $15 billion in assets, including RIM and Apple shares. “It does identify, even with a home-country bias, how consumers are responding to the greater functionality of the iPhone.”

To halt a sales slump that’s spreading north from the U.S., Thorsten Heins, RIM’s new chief executive officer, has vowed to do something “dramatically different.” The BlackBerry 7 phones introduced last year have better Web browsers and touch-screen navigation than older models and the BlackBerry 10 devices due out this year will represent further improvement, Heins said.

Losing the Way

Sales in Canada, which account for about 7 percent of RIM’s revenue, fell 23 percent in the fiscal third quarter from a year earlier as U.S. sales tumbled 45 percent. That dragged worldwide revenue down 5.9 percent, offsetting rising emerging-market sales.

While RIM was once a hotbed of innovation, it didn’t invest enough in promoting its devices once the iPhone arrived, said Alfred DuPuy of Interbrand, a research firm.

“They got so good at innovation they just expected the product to sell itself,” said DuPuy, head of the firm’s Toronto office. “From a brand perspective, they just lost their way.”

BlackBerry slipped two spots to 54th in Interbrand’s October 2011 ranking of the world’s top 100 brands as Apple climbed nine spots to eighth.

“The challenge for Mr. Heins is to take that iconic brand and products that are reasonably competitive and ensure that they do get appropriate attention from the average consumer,” BMO Harris’s Taylor said. “That’s the challenge: to reverse the negative sentiment that has developed.”

Betting on Decline

Market-share losses, a series of marketing missteps and product delays sent the stock down 75 percent last year and RIM today closed down 91 percent from its mid-2008 record. That hasn’t stopped investors from betting on further declines. Short interest (RIMM) in RIM reached an eight-year high this month.

RIM will probably say fourth-quarter profit fell by more than half to 82 cents a share when it reports results March 29, according to a Bloomberg survey of analysts. Sales probably dropped 18 percent to $4.53 billion, analysts predict. RIM said in December sales would be $4.6 billion to $4.9 billion.

By contrast, Apple’s fourth-quarter profit more than doubled to $13.1 billion -- almost triple RIM’s sales -- as revenue surged 73 percent to $46.3 billion.

RIM declined 1.9 percent to $13.78 at 4 p.m. in New York and Apple fell 0.5 percent to $599.34. Apple has gained 48 percent this year and soared almost six-fold since 2009.

Heidi Davidson, a spokeswoman for RIM, declined to comment, citing a quiet period ahead of earnings.

Loyal Customers

Still, many of Canada’s banks and the federal government remain loyal to RIM devices. Royal Bank of Canada, the country’s largest bank, only issues BlackBerrys, said Katherine Gay, a spokeswoman for the Toronto-based bank. Bank of Nova Scotia and Bank of Montreal do the same. Toronto-Dominion Bank (TD), which issues BlackBerrys to its staff, is assessing the policy and allows employees to use personal Apple and Android devices for corporate e-mail, said Dave Codack, head of employee technology.

BlackBerry still has an edge over the iPhone in some emerging markets. In the Middle East and Africa, RIM shipped 8.3 million handsets to Apple’s 2.5 million iPhones last year. In Saudi Arabia, teenagers have embraced RIM because they can flirt using its free BlackBerry Messenger instant messaging, avoiding local religious police who restrict interaction between unmarried men and women.

In Latin America, RIM outsells Apple by an even larger margin, with 10.6 million BlackBerrys shipped versus 2.1 million iPhones in 2011, according to IDC. Venezuelan President Hugo Chavez has dubbed his BlackBerry and Twitter account his “secret weapon.”

More Affordable

For Venezuelans, a no-frills BlackBerry Curve is more affordable than the iPhone because Latin American carriers don’t typically subsidize the cost of devices in exchange for multiyear contracts the way North American operators do. That price advantage has helped RIM expand its base of 75 million subscribers worldwide.

Local concerns about Canada’s technology sector grew after Nortel Networks Corp. (NRTLQ), once North America’s largest phone- equipment maker, filed for bankruptcy in 2009. Nortel, which helped incubate dozens of startups in its heyday, was broken up and its businesses and patents sold to rivals including Ericsson AB and Apple.

That collapse put more pressure on RIM, which had already overtaken Nortel to become Canada’s biggest technology company, to lead the industry’s expansion in the country.

Pitched to Carriers

RIM’s early growth was due in part to the way former co-CEO Jim Balsillie persuasively pitched the BlackBerry to wireless carriers, said Shaw Wu, an analyst with Sterne Agee & Leach Inc. As consumers increasingly choose smartphones for their range of apps, and more companies allow employees to bring their own devices to work and fewer issue BlackBerrys, RIM risks being left behind by the iPhone, Wu said.

“RIM in the past did really well as carriers pushed the product and that’s what sold,” said Wu, who is based in San Francisco and rates RIM the equivalent of a hold. “Now you get the opposite, it’s not what the carriers push but what customers want and customers are choosing iPhones -- even in Canada.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net