Features October 7, 2010, 5:00PM EST

RIM's BlackBerry: Failure to Communicate

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Research in Motion's market capitalization pales in comparison with Apple's Data: Bloomberg

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To some on Wall Street, like investor Buzzy Geduld of Cougar Trading, RIM looks like a company on the precipice. "They need that revolutionary product," he says. Nobody has achieved a seamless mobile Web experience; if the PlayBook succeeds, it may turn out to be a coiled spring. Look at the numbers and it's also clear that RIM is anything but dead. It's still the dominant smartphone for business, with a 41.5 percent share of worldwide business use, vs. 17.5 percent for Apple, according to IDC. It beat Wall Street expectations when its earnings rose 68 percent and revenue jumped 31 percent in the quarter that ended Aug. 28. Even RIM's reputation for security arguably got a boost when Saudi Arabia, India, and the United Arab Emirates recently threatened to shut it down because it's tough to monitor BlackBerry messages. "It's the No. 1 smartphone in the U.S., and in places like Latin America it has incredible cachet with the younger generation," says IDC Vice-President Stephen Drake. "It kind of puzzles me why people are so quick to write them off."

Maybe they can't understand the story. Balsillie says he didn't want to tell it until the technology was ready, but RIM has been slow to the marketing game. The first BlackBerry TV ad ran in 2008, nine years after the product was launched, when it was already racking up sales of more than $6 billion a year. (Sales hit almost $15 billion in the year that ended Feb. 27.) RIM hired its first chief marketing officer, Keith Pardy, last year. It lacked a full-time chief financial officer—critical for communication with Wall Street—for more than two years until former chief accounting officer Brian Bidulka was formally named to the job last December.

Then there are the co-CEOs, who have split the top job since 1993. Lazaridis, 49, is a Turkish-born whiz kid who grew up in Windsor. Ont., and dropped out of college to build an industrial display network for General Motors; he founded RIM in 1984. Balsillie, also 49, joined in 1992. He's a tradesman's son from rural Ontario who went to Harvard Business School. Each is more comfortable talking about the desires of chief technology officers than the needs of the average person. To hear Balsillie talk, it's easy to forget that more than half of RIM's 50 million subscribers are individual consumers. "You hear this cliché, the consumerization of technology, and I don't buy that," Balsillie says. "When I talk to CIOs, users may want to consumerize, but I have to maintain enterprise greatness."

Those chief information officers, though, are increasingly happy to have employees bring their own smartphones to work. It's cheaper than issuing corporate BlackBerrys that users then expense each month, and companies such as Credit Suisse (CS) get around the security issues by encrypting their data through third-party software. "I don't care what device someone has," says Steve Hilton, the bank's head of technology infrastructure services. "We want to get out of the game of managing the system for those devices." Then there's London's Standard Chartered Bank, which announced in May that it's switching completely to the iPhone because of the opportunities to develop more apps.

Balsillie thinks the world is wrong about apps. Many are just glorified bookmarks, he argues, that aren't necessary if you can connect customers to the Web. "I'm not going to bring developers to the Web. I'm going to make mobility Web-friendly," he says. "Why do you need a YouTube app if you play YouTube? Why do you need an app to follow the Tour de France if you can just follow the Tour de France?"

Balsillie has a point—or he would if the consumer universe operated logically. "But we're not living in a perfectly rational world," says Roger Entner, head of telecom research at Nielsen. "People are now living with a very app-centric mindset."

That's why Apple remains the biggest threat to RIM. The marketing and design juggernaut has even turned its retail stores into an entertainment experience. As Wharton marketing professor Eric Bradlow notes, "Apple has done a great job of constructing the playing field and defining what these products should do. RIM is functionally superior, but people are evaluating it on attributes that Apple has defined." RIM's response, he and other critics say, has been to issue "me too"products while refusing to acknowledge Apple as a potent competitor. Some analysts have reacted to its latest offering, which doesn't go on sale until next year, as a sign of desperation. "This was essentially more of a vision statement than a product," says Rodman & Renshaw analyst Ashok Kumar, who argues management is losing its credibility.

Zach Nelson, CEO of application developer NetSuite (N), calls RIM's strategy of developing a tablet for the business market "a genius idea" but says the pressure is on to deliver a game-changing product. "Now is their time to respond," he says. " I think management will be judged more by what they do in the next year than by what has transpired in the last year."