Blackberry Blackout a Second Break for the Windows Camp

Apple’s iPhone 4S launch turned out to be an evolutionary step, not an earth-shattering new product many were expecting. Just days later RIM was hit by a data service glitch that has spread to five continents and still isn’t fully resolved. This is pretty much what the Windows camp needs just to get a small chance of clawing its way to 10% mobile OS market share by 2013.

There are two reasons why the Blackberry service fiasco is very bad news for RIM. First – the new flagship Bold devices were priced way too high. Not only on North America, but also in Asia and Europe. At this price level, there is no room for quality problems. Second, the new Torch product line has received crushingly bad reviews and is apparently flopping out of the gate. This leaves RIM highly dependent on Bold and Curve ranges – and Bold is priced to sell only to die-hard Blackberry fans.

The service glitch apparently originated from the Slough data center in the United Kingdom – and based on my conversation with European carriers, it’s quite possible that one major trigger factor was the radically improved browser of the new Bold. The older Blackberry models had such clumsy browsers that their users spent minimal time accessing the internet – less than 10% of the time iPhone users spend on browsing. But the new Bold 9900 line features a browser that is truly impressive – possibly on par with the iPhone browser, albeit on a smaller display.

RIM processes all web content accessed by Blackberry users in order to speed the browsing experience – and the new Bold was a long-delayed high-end Blackberry, eagerly waited by many UK high-income, relatively heavy-browsing consumers. The surge of Blackberry Bold 9900 upgraders in Europe during

September and early October may have spiked the web traffic by Blackberry owners in Europe to a level the Slough center was unable to cope with.

It is not clear that this problem can be fixed easily and rapidly. RIM depends on Waterloo and Slough centers for all its global data processing. Blackberry users may not be convinced that they will not have to deal with this issue again sometime later.

Windows has been an epic commercial failure as a mobile operating system for a decade – but it looks like it may get another shot at success due to the Blackberry product development and data service problems.

Basically, RIM is now down to selling little more than 10 M units a quarter. Nokia is down to selling perhaps 13 M Symbian smartphones a quarter. If the new wave Nokia Windows phones are reasonably well-designed – and if the Android patent trouble persuades Samsung, HTC and LG to launch a strong Windows range in 2012 – there may be room for Windows in the low-end of the smartphone market.

The growth of the $300-plus category of smartphones is slowing to below 30%, possible below 20% this winter. But the growth of the sub-$200 smartphone category remains above 80%. Neither RIM nor Apple have shown real aggression in the budget smartphone space – and Samsung as well as HTC also seem notably hesitant about this niche. There is an opening here for Nokia, Huawei and ZTE – and all three have shown willingness to press smartphone pricing aggressively below $200.

Nokia’s share price has gone up sharply after the iPhone 4S launch. Probably too sharply. Even if the iPhone 4S and RIM’s bungling leave maneuvering room for Nokia, I suspect investors are not prepared to see just how ugly the 3Q11 is going to be for Nokia. The company missed the back-to-school season with the delayed shipments of the new 600- and 700-series models. European carriers seem notably hostile towards these revamped Symbian devices. If there is a time to gamble on Nokia’s possible second wind from Windows success, I suspect the entry point has not yet arrived. Nevertheless, both Nokia and Microsoft may get another shot at mobile success in 2012.