RIM’s profits go up, but its stock goes down: what’s wrong?

Blackberry, made by Research in Motion, has been the dominant smartphone, especially among businesspeople and corporations, for nearly a decade. And while it’s still dominating the corporate realm, and remains the choice for most business professionals, its overall share in the smartphone market is dwindling, thanks to relative newcomers the iPhone and various Android-based devices.

On one side of the coin, RIM has handled it well. They saw a substantial increase in profit in the first quarter of this year. But on the other side, their stock value has eroded. This isn’t a particularly common situation: these are often relatively parallel lines on a metric chart. But for one reason or another, consumers are buying Blackberries, yet investors aren’t buying the smartphone’s maker.

PR consultant for VSC Consulting Vijay Chattha wrote a guest post for tech-news site TechCrunch today suggesting why this may be. “No buzz,” he states bluntly. “Despite continuing to reign supreme as America’s smartphone of choice, RIM’s Blackberry devices are not creating enough excitement in the market.”

It’s a valid enough point to warrant some discussion, at any rate. Vijay goes on to list 5 ways RIM can boost its buzz, and, consequently, its stock. Among them is leveraging US president Barack Obama, going as suggesting RIM makes a special edition “Barackberry,” and “buying Hollywood” – having the smartphone product-placed into big-budget flicks. He also suggests invading Silicon Valley more aggressively, and shifting the business model of Blackberry’s App World to a break-even system.

Unfortunately, there are some holes in his advice big enough to lay a body in – or, in this particular case, a smartphone maker. Buying Hollywood and storming through the great American tech valley are foolish, expensive, and risky ventures. Not to mention pointless, as the device will unlikely be able to penetrate the iPhones fortress of pop culture suave. Leveraging Obama boasts tremendous potential, though Vijay’s Barackberry theory was over-the-top, but no matter anyway: it’s believed that since his presidency, Obama has ceased to actually use Blackberries (he proclaimed their greatness at times during his election campaign), instead opting for a private, highly secured personal device.

A break-even business model for Blackberry’s App World is probably more financial strain than the company could handle. Vijay notes that Apple’s apps account for just one percent of the company’s profits, and argues iTunes app store and all app promotions are really just to inadvertently promote the hardware. But one percent of their profits still means the app store is making good money, and RIM’s needs to as well. App promotion and hardware promotion can be performed simultaneously.

Vijay’s final suggestion is to compete directly with iTunes, not the iPhone, by buying a smaller music subscription service and integrating MP3 player features into Blackberries. But how can RIM pit itself against the very makers of the insanely popular iPod and hope to come out alive? Besides, the demographics are too variable. Many consumers choose Blackberry because it isn’t inundated with music and games.

Vijay may very well be right when he refers to RIM with a quote from the movie Swingers: “You’re money and you don’t even know it.” RIM and its awesome lineup of Blackberries have been very successful all these years, are still successful, and are still capable of remaining successful for years to come. But throwing rocks at Apple’s brick-walled market share in the app and music categories is, as the metaphor suggests, futile. So is bursting into the Valley and the A-list celeb club. What Blackberry needs to do is simply continue to innovate its phones and keep up with the competition. They need a better interface, sleeker silhouettes, and potent new software features. Maybe they’ve been slacking lately. It could be that the company isn’t accustomed to these new kids on the block – that it wasn’t ready for a street fight. Well, now’s the time to dig in their heels and hold their ground, and the way to do that is to do what they’ve done all along: raise the bar for quality mobile devices, time and time again.