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‘The epitaph of RIM has been written far too early’ Add to ...

At an AT&T store in New York a few months ago, a high-performing sales clerk faced a rather unusual situation because of his success.

The salesperson had sold the most cellphones during the month of May at one of AT&T’s locations in midtown Manhattan. His reward was one of the newest gadgets around: a PlayBook tablet computer by Research in Motion Ltd. But his store didn’t have any of the devices in stock then, and it still doesn’t have any.

So he’s still waiting for his prize, but he doesn’t much care. To use the PlayBook, he knows he’ll need to buy a BlackBerry smart phone. And as a loyal user of Apple’s iPhone, he doesn’t see that happening. “I think I’ll just sell the thing when I get it,” he said. “Why do I want a BlackBerry? Everything I want to do, I can do better on the phone I already have. The little keyboards are nice, but that’s all.”

What a rapid and unpleasant fall it has been for the BlackBerry, arguably the most influential technological innovation to come out of Canada for decades. Five years ago, it was the only smart phone worth owning. Two-and-a-half years ago, Barack Obama fought for the right to keep his beloved BlackBerry as he moved into the White House (there were security concerns). RIM even signed up rock band U2 to pitch the BlackBerry in television ads.

The BlackBerry was the world’s coolest wireless device, until suddenly it wasn’t.

Of all the difficulties RIM has faced this year - the bumpy launch of the PlayBook, controversy about its dual-CEO structure, and this week’s announcement of 2,000 layoffs - none is more threatening than this: The company’s signature product has lost some of its prestige. RIM’s share of the consumer market has been pulverized by Apple Inc. and devices that run Google Inc.’s Android operating system.

Now, RIM is set to unleash a slew of sleeker, more sophisticated BlackBerrys, and the pressure has never been more intense. After an abysmal first quarter, a dizzying share price drop and the unprecedented job cuts, Canada’s most important high-tech company truly needs to wow the market if it wants to get its momentum back.

The high expectations around RIM’s forthcoming release have grown in part because co-CEO Jim Balsillie has deflected most of the recent criticism with talk of a crucial “transition” that will lead to stellar growth in the latter half of 2012. With new devices and an update of its core operating system, now called BlackBerry 7 – which will be replaced by yet another new system next year, called QNX - RIM hopes to stem the market share loss and reassert the BlackBerry as the smart phone of choice for Western business people, savvy consumers and new wireless users in fast-growing markets such as Latin America and Asia.

There is, however, more pain to be absorbed first. RIM executives and staff know the next few quarters will be as miserable as the last - that even if the new phones are a success, it will take a while for them to affect the bottom line in a meaningful way. Industry players, many of whom have already tried out the new products, are mixed on the new crop, though, and on the company’s outlook. RIM may be building a better BlackBerry, but is it enough to stem the losses to Apple and Android?

“I think BlackBerry 7, in absolute terms, is a much better BlackBerry experience,” says Mike Walkley, an analyst who follows global handset makers for Canaccord Genuity and has seen the new devices. “But in relative terms, it’s still going to look like your dad’s BlackBerry – and it’s probably going to fall further behind the Android and Apple smart phones in terms of consumer preference.”

This is partly because RIM’s software and hardware have never been as tailored to multimedia functions such as video the way rival devices made by Apple, Samsung and others have. That’s a problem because smart phones are, increasingly, becoming do-everything gadgets – fulfilling the roles previously played by Mp3 players, high definition video cameras, gaming consoles and desktop computers.

RIM has instead relied on its strengths in secure wireless e-mail, which has allowed it to dominate the enterprise sector. It also boasts the QWERTY keyboard, which many people love because it makes typing easier, although creates limitations in design.

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