What happened to

Research in Motion

(RIMM)

?

It has been the king smartphones seemingly forever. Yet, it's stumbled badly. Last Thursday, it announced its new subscribers were less than analysts expected and the stock dropped 10% the following day.

Now there seem to be thousands of RIMM haters among hedge fund managers and investors. Why? Didn't it add almost 5 million net subscribers last quarter? How can it be dying with that kind of growth?

In the stock market, the focus is always on where companies are going - not where they've been. In the smartphone market, this is probably doubly true.

Motorola's

(MOT)

RAZR used to be the world's No. 1 selling phone for many years, and as late as 2007.

After former CEO Ed Zander quit the company, one of his successor's (Greg Brown) first marketing campaigns was a promotion of the newest incremental version of the RAZR. Management then said that the new version would help the RAZR on the top by being faster and sleeker. However, the new RAZR was a dud and we haven't talked about it since. That story is a warning sign for RIMM.

The mobile phone and now smartphone business is brutally competitive. There's no loyalty. What's hot today is ancient history tomorrow.

At a conference last month,

Apple

(AAPL) - Get Report

CEO Steve Jobs talked about how he liked the consumer market much more than the business market. His reasoning was that, in the consumer market, if you make a good device, people will buy it. If you don't, they won't.

In business, it's often not the end users who are making the purchase decisions, so inferior products can remain market leaders for years and years with no accountability.

The co-CEOs of RIMM (which has always been a terrible organizational structure which hasn't been previously questioned because of RIMM's prior success) should take a look at that Jobs interview. RIMM is about to be RAZR'ed in the consumer market by Apple's iPhone 4 and the new phones using

Google's

TheStreet Recommends

(GOOG) - Get Report

Android software which are popping up all over.

Ask yourself how many of your friends and colleagues who have bought a phone within the last year have bought an iPhone, Android phone or BlackBerry. That's why the net new subscribers are growing at a slowing pace and I believe new additions will continue to slow.

RIMM bulls say that they are still No. 1 in market share for smartphones and that business users still crave the BlackBerry as an email tool. It's true, as Jobs said, that business owners could still use BlackBerrys for a long time to come. However, what reason is there for a consumer - the vast majority of the smartphone market - to buy a Pearl or a BlackBerry, when there are so many more apps and feature functionality form the Google and Apple phones?

In terms of the point about RIMM being No. 1, I would say (1) look at what has happened to former No. 1 phone seller Motorola and (2) Apple wasn't in this market two- and-a-half years ago. Things can change quickly and past success doesn't predict future performance.

If you think there's fear or concern in Waterloo (RIMM's headquarters) about the competitive threat, you wouldn't have picked it up on last week's earnings call with co-CEO Jim Balsillie.

In response to Bank of America Merrill Lynch analyst Vivek Arya's question about what differentiated the BlackBerry from iPhone or Android, Balsillie said:

"Well, I mean, be careful about your implicit assumptions in your question, or shall I say explicit assumptions in your questions. Yes, I think you guys just have to watch and see what the plans are.

"I think there's a lot of implicit and explicit assumptions, and that maybe should be examined. And part of that is the question of how powerful is their innovation is a good question, what's the timing of it, it's a good question. I think an important question to ask is, how much does constructive alignment matter to a carrier, because that's been just an enormous issue throughout Europe and Asia, and definitely coming on in Europe.

"And I think how much does efficiency matter, and when you look at these pricing plans, I think that that should tell you something. So I mean, you watch and see. I mean, we have unprecedented campaigns and device programs and commitments in our history. And I'm just not going to talk anything more about our products and our launches until their time."

That's not an answer, but it also displays a mindset that Balsillie and presumably others within RIMM management possess. The attitude appears to be: "We're the market leader for smartphones. We've been on top and we're going to stay on top. Wall Street and consumers just don't understand us and we'll prove them wrong."

There's an indifferent quality in this response. In this industry, indifference will kill you. Ask

Nokia

(NOK) - Get Report

about how being No. 1 in market share for phones has helped them in the last three years. If that doesn't scare RIMM, what will?

I saw a tweet yesterday that said that when they update the book "The Innovator's Dilemma," they'll have to add a chapter about RIMM. They're exactly right. That book is all about how former market leaders weren't able to stay on top because they became complacent and stopped innovating. RIMM has fallen into this trap.

It made a great email device and became rich and dominant. It extrapolated that this would continue and it only needed to make a little improvement here or there and that would take it forward. When it tried to mimic a hot market trend -- like when it came out with the Storm in response to consumers' interest in touch screens - it failed. Now, it's talking up a new tablet (call it the Son of Storm).

Color me dubious on RIMM's future.

At the time of publication, Jackson was long Apple and Google and short Research In Motion.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson