RIM Might License BlackBerry Platform: Crazy Or Genius?

Jefferies & Co. analyst Peter Misek believes that Research In Motion already is exploring the idea of licensing out its forthcoming BlackBerry 10 platform to hardware competitors such as HTC and Samsung.

"We think some of this has already been started with RIM likely agreeing to license Blackberry 10 to Samsung, HTC, and possibly others," said Misek.

"This would help create a critical mass for the ecosystem and maintain RIM's monthly service revenue; however, it puts more pressure on the hardware business in the short term. Longer term, it possibly gets people hooked on the RIM ecosystem and may in fact allow them to sell more BB 10 handsets (if they are able to create compelling handsets)."

I am not sure if the idea is insane or genius. Let's discuss.

[ RIM's miseries are compound. See RIM BlackBerry Outages Day 3: U.S. Hit. ]

As evidenced by years' worth of earnings, we know that the lion's share of RIM's revenue is created by selling hardware. That means BlackBerry smartphones. Its most recent earnings report showed that 79% of its revenue came from hardware sales, 19% from service, and 2% from software.

First, the idea that RIM would give up even a fraction of 79% of its revenue is absolutely bonkers. How could it possibly recoup the loss in hardware sales with licensing fees? RIM's hardware competitors would have to sell hundreds of thousands of devices.

Second, HTC and Samsung both are already immersed in at least two smartphone ecosystems: Android and Windows Phone. Samsung has a third, its own Bada platform. There's no compelling or obvious reason for either company to adopt yet another smartphone platform.

Third, the development times are far too long. The platform itself won't surface until the end of 2012. Surely RIM would give its own hardware a head start before offering to license the platform to other vendors. That means early to mid 2013 before other vendors could bring BB 10 hardware to the market. By early 2013, Apple likely will have released iOS 6, Google will have released Android 5.0, and Microsoft likely will have released a significant update to Windows Phone. Products running these operating systems all will be available long before BB 10 hardware from vendors other than RIM, and their hardware will be two generations further along.

Fourth, Misek's theory assumes that BlackBerry 10 is worth licensing. If there's one thing RIM has failed at with its smartphones, it is to create compelling software. No one will want to license a crummy operating system. We have to look no further than webOS, which Palm and HP considered licensing. WebOS was a decent operating system, and no OEMs licensed it.

Bottom line, this idea seems like a last-ditch effort that would be necessary only if RIM's hardware business collapsed completely. RIM might be losing the game at the moment, but it's certainly not out of the game entirely.

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