Sadly for Nokia (NOK) and Research In Motion (RIMM), the iPhone 5 may not be the catalyst for their downward circling of the proverbial drain. RIM is already within the event horizon. Escape from the gravitational pull is unlikely, with Nokia not far behind.
How can we be sure RIM gets extinguished? After all, sales in several large markets continue to grow. Indonesia, for example, is a market where RIM continues to demonstrate effective merchandising. Sales in India at the start of 2012 have never been stronger.
But what the big print giveth, the fine print taketh away. Not all sales are alike. Selling large volumes of phones doesn't mean large profits. RIM had to cut prices in India, and, even after price cuts, sales may have peaked. In the lucrative North American market, RIM smartphone sales have fallen to under 10%.In a growing market with many competitors, a 10% market share could be great. But in a maturing market, with two large dominant smartphone ecosystems -- those of Apple and Google (GOOG) -- a third-place single-digit market share equals loss of critical mass. Five years ago, critical mass didn't mean very much. Today, mobile phones are as much mobile computers as they are phones. IPhone and Android have 300,000 plus apps each, while BlackBerry has about 70,000. Granted some are worthless. But all else being equal, which phone do you pick? Or perhaps more importantly, which phone will the average consumer pick, if they don't already have a preference? You can bet (as many short sellers have, based on the short interest in RIM) most consumers will continue to pick an Android or iPhone when the salesperson informs them that BlackBerry has about one third as many apps. Because app developers add two and two as easy as the consumer, it becomes a vicious cycle of low consumer interest feeding low developer interest. We get the loss of critical mass so important to iPhone and Android.
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