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AT&T Approached RIM to Make Apple Competitor -- While It Held Monopoly Over US iPhones

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"SORRY, THAT MAKES TOO MUCH SENSE"
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MINYANVILLE ORIGINAL  Yesterday, Research In Motion (RIMM) recorded a face-ripping loss of $0.37 per share for the last quarter, way steeper than analyst estimates of $0.03. And if that wasn't enough, the Canadian company will be laying off nearly a third of its workforce and pushing back the already-late (probably due to being shorthanded engineers) BlackBerry 10 operating system. If there are any BlackBerry fans out there (besides those trend-setting hipsters at the Department of Defense), they probably like it for the physical keyboard, or their bosses just force it on them because of RIM's reputation for high-security. BB10 will not have that keyboard. And either way, the Osbourne effect guarantees that RIM sales won't be more than a trickle until the first quarter of 2013, now that consumers know that the stuff they see on the shelf will be obsolete faster they can say "Samsung (SSNLF) Galaxy S III."

That makes it all the sadder to remember what a cutting edge company RIM once was. And when the iPhone started to dominate the smartphone market, it was in the position to keep the market balanced. 

The Wall Street Journal published a sprawling history of the company that concluded that it was a "blinding confidence"  -- hubris -- in the basic BlackBerry, a lack of willingness to see which way the wind was blowing, and a dearth of resolve to change tack, that led to RIM's undoing.

In 2010, the Journal reports, AT&T (T), Verizon (VZ), and Vodaphone (VOD) came to RIM, hoping to use a stellar offering from Waterloo to compete with the iPhone and act as a counter-weight to Apple (AAPL) dominance. 

"In 2010, AT&T Inc., then Apple's exclusive carrier partner, approached RIM about a plan to develop a touch-screen rival to the iPhone," former RIM executives told the Journal. "The chief of AT&T's mobile division visited RIM's research and development team in Waterloo to stress how important it was for AT&T to have a successful BlackBerry product to sell, according to people familiar with the visit. RIM said the objective of the visit was to develop 'a differentiated, unique BlackBerry experience for AT&T customers.'"

The resulting product, the BlackBerry Torch, did not go down in history as an iPhone alternative, but rather as a buggy mess.

In 2007, several handset manufacturers and carriers, including Microsoft (MSFT), T-Mobile (DT), Sprint (S), and Intel (INTC), led by Google (GOOG), formed the Open Handset Alliance to compete with Apple, and the result was Android, which is only beginning to bear fruit of comparable quality to the iPhone. Carriers today are hoping that Windows Phones and Androids can show Apple that they aren't the only game in town, giving them some bargaining power when it comes to carrier subsidies. 

That's probably not likely to work. In the latest Apple earnings call, CEO Tim Cook brushed those fears aside. Cook said:

Our focus is on making the very best smartphone in the world. And a phone that delivers a -- just an off-the-charts user experience that customers want to use every day of their lives. And at the end of the day, I think that carriers, the vast majority of carriers, or maybe even all carriers, want to provide what their customers want to buy. And that's what they're motivated for.

And so the most important thing by far is for Apple to continue making great products that customers want. And we are deeply committed to doing this and are innovating at a rate and pace that's unbelievable in this area. For -- from a carrier's perspective, I think it's important to remember that the subsidy is not large relative to the sum of the monthly payments across a 24-month contract period. And any delta between iPhone and maybe another phone is a -- an even smaller level of difference.

Let's not send out the funeral invitations just yet. RIM's heart is actually still beating. Unfortunately, the future might be in cannibalization, rather than resurrection. 

Today, Matias Duarte, Google's head Android designer, told ABC that he would love to work with RIM if they wouldn't mind manufacturing Android handsets. 

“If RIM wanted to work on Android devices, I would really welcome that. They clearly make great physical keyboards," Duarte said, adding that he would love to produce a portrait-oriented UI for use on devices similar to the BlackBerry.

Thorstein Heins, the current CEO of RIM, is adamantly against becoming just another OEM in the Android world. Reuters reported today that RIM might not be in the position to be picky at this point. One possibility would be licensing or selling RIM's high-security proprietary messaging technology, a move that former executive Jim Ballsillie had championed and Heins is opposed to. RIM might also sell its patents to Microsoft or abandon BlackBerry 10 in favor of the Windows Phone operating system. 

Only time will tell, and it might not even take that much time, given the desperate situation the company is in.

Twitter: @vincent_trivett
POSITION:  No positions in stocks mentioned.

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