Apple beats Microsoft on profits
And the RIM alliance is, of course, about Apple as well as Google. Indeed, the Mac maker was the darkest shadow over Microsoft's solid figures, because the latter's $5.23bn profit figure fell behind Apple's $6bn, the first time it had earned less than Apple since 1991 (though the Windows maker retains far higher margins). Apple epitomises the Windows giant's problems in two ways – its slow progress in mobile, compared to that of the iPhone; and the possible erosion of the traditional Windows PC by tablets, where Microsoft has yet to play a convincing hand. The firm was hit by slowing PC sales, blaming a shift to cheaper laptops and netbooks running cheaper versions of Windows.
But some analysts could already see the tablet being a factor too, particularly consumers choosing an iPad over a notebook upgrade. "You have to live underneath a rock not to know that the iPad has taken share from the netbook," Pat Becker, principal of Becker Capital Management, told Bloomberg. "It's a problem on the consumer side, and that's a market where Microsoft continues to give up territory to Apple."
In fact, the Entertainment and Devices division, which houses Windows Phone 7, was the brightest spot in the results, with operating income up 50 per cent year-on-year to $225m and revenue up 60 per cent to $1.9bn. However, the star performer was not the new mobile OS, but the Xbox games platform, currently Microsoft's most important revenue driver. Its other key strength, Office, was more grounded in past patterns, and therefore may be more vulnerable going forward.
Overall, Microsoft reported revenue up 13 per cent year-on-year to $16.43bn and profit up 31 per cent to $5.23bn, both ahead of Wall Street forecasts despite the much headlined Apple comparison. PC slow-down saw the Windows division falling back by 4 per cent in revenue terms, even though Windows 7 sold 350m licences in 18 months. Office delivered a 21 per cent revenue boost for the Business Division, which overtook Windows as the top profit generator among the five business units. It had $3.2bn in operating income on revenue of $5.3bn.
RIM's new direction
For RIM's part, getting closer to Microsoft – and possibly, by association, another old frenemy Nokia – is both a humiliation, for a firm that has insisted it could thrive purely on its own merits, and a strong opportunity. It has seemed clear for a decade that RIM would eventually need to fall back on its BlackBerry back-end services and famous messaging technologies (newly relevant in the era of non-stop social networking), and abandon its own device platform and brand. Against all odds, that day has not arrived, and is unlikely to in the immediate future.
But once RIM acknowledged that BlackBerry OS was exhausted as a modern mobile system for the web world, by adopting a whole new system for the tablet, the die was cast. It then acknowledged this would have too high a mountain to climb as a new entrant, by supporting Android apps. BlackBerry will become a niche player like Palm did, and the firm needs to recast its role, as HP is doing with webOS, to tap into a multivendor cloud era. Here is has chances to outwit Apple, whose isolationism will cause problems in the cloud, and whose need to control its platform from head to toe will limit its freedom of action. Apple will make a huge impact, of course, but here is a better place for Microsoft/Nokia/RIM to attack than on the iPhone.
RIM was once in Apple's position of being able to spurn friends, and maintained equally obsessive control of its platform and its primary relationship with the end user. Every email went though its data centres (a policy that is now biting it in security-sensitive countries such as India) and its crown jewel was the licensing of BlackBerry Enterprise Server (BES). The core push email and enterprise services remained locked tightly away in the BlackBerry, with brief flirtations with more open policies largely fizzling out.
The new world in which RIM operates was epitomised by one announcement at BlackBerry World. Not the Bing deal, which was unsurprising given that RIM has never got to grips with its own apps and web services (one of its problems). No, the opening up of BES, first signalled at Mobile World Congress in February, which will extend the BlackBerry's core device management, provisioning and push synchronisation technology to iPhones, iPads and Android.
On the PlayBook, RIM is showing its new open credentials, even while making a last-ditch attempt to preserve its device brand. It knows it will not amass a huge native developer community, but it will support Adobe AIR, Android, and porting solutions including the Unity Game Engine. This will dilute RIM's visibility to consumers and programmers, but keep the all-important BlackBerry services intact by ensuring the PlayBook and BlackBerry are still viable devices with plenty of software.
RIM is finally doing what has seemed inevitable for years, relying on its services rather than its devices – and in a wholehearted way rather than through the half-baked approach of BlackBerry Connect. It is accepting that enterprises with large investments in BES now want their employees to carry iPhones.
This is a lesson Microsoft needs to learn too. It must acknowledge that, slowly but surely, enterprise workers and consumers will carry phones and tablets, not PCs, and those will frequently not be running Windows. That does not stop Microsoft from controlling the back-end services, whether directly in the enterprise or in the cloud. Ballmer's desperate clinging to the front-to-back Windows dream must end quickly, and the RIM announcements suggest that it finally has.
Copyright © 2011, Wireless Watch
Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.