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Should RIM License Blackberry 10: Pros And Cons

Research In Motion CEO Thorsten Heins admits the company is exploring a licensing model to help scale up BlackBerry 10. Could this really help RIM's smartphone business?
Thorsten Heins, CEO of RIM, indicated that licensing its BlackBerry 10 mobile platform is being discussed as a potential tactic to help revitalize the BlackBerry maker's sagging fortunes.

"We don't have the economy of scale to compete against the guys who crank out 60 handsets a year," said Heins in an interview with The Daily Telegraph. "We have to differentiate and have a focused platform. To deliver BB10 we may need to look at licensing it to someone who can do this at a way better cost proposition than I can do it. There [are] different options we could do that we're currently investigating."

In other words, RIM may build the platform, similar to the way that Microsoft builds Windows Phones, and then allow other hardware manufactures to make their own hardware with BB10 on board.

"You could think about us building a reference system, and then basically licensing that reference design, have others build the hardware around it--either it's a BlackBerry or it's something else being built on the BlackBerry platform," explained Heins. "We're investigating this, and it's way too early to get into any details. We have to also model this from a finance perspective--that's why we're working with the financial advisers to see, if we do this, where it would take the company. Either we do it ourselves or we do it with a partner. But we will not abandon the subscriber base."

[ Read about RIM's new entry into the tablet market, the 4G-compatible Playbook. See RIM To Sell LTE 4G Playbook Tablet. ]

Pursuing such a tactic would be a massive departure from RIM's current business model, which is to own the entire ecosystem. How could this play out for RIM? Let's look at some pros and cons.

Pros:

1. Form Factor Choice. Allowing multiple manufacturers to have a shot at making BlackBerry smartphones would lead to a wide range of different devices and form factors. This would be a boon for consumers, allowing them to pick the device (touch, QWERTY, touch+QWERTY) that suits them best.

2. Larger User Base Potential. With more devices from which to choose, consumers could be tempted to return to the BlackBerry fold, especially if killer services such as BBM are integrated into all the handsets and not only those sold by RIM.

3. Focus On Software. By tapping into the hardware prowess of others, RIM could sit back and really focus on the platform itself. RIM has been working hard to get BB10 to market, and it has delayed the release several times already. Allowing the company to put more resources behind the software--which, let's face it, is the real differentiator here--could lead to software that is much more powerful and refined.

Cons:

1. Brand Dilution, Loss of Control. Letting other OEMs make BlackBerrys would dilute RIM's branding, or at least set it in an entirely new direction. It would also force RIM to give up the control it has over the entire BlackBerry ecosystem.

2. Developer Headaches. One thing RIM prides itself on is a strong developer support organization. That could change if developers suddenly have a multitude of screens, processors, radios, and other hardware elements to contend with. Perhaps RIM would have to set guidelines similar to those mandated by Microsoft with its Windows Phone hardware requirements.

3. Lost Revenue. About 70% of RIM's revenue comes from sales of its BlackBerry handsets. That's the majority of the company's income. There's simply no way RIM could recover that lost revenue through licensing fees. The company would be competing with its licensees for hardware sales.

What do you think--could this licensing plan work for RIM? Obviously there are plenty more benefits and pitfalls to such a plan. Please feel free to sound off in the comments below.

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