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March 13, 2006

BlackBerry Faces Challenges Beyond The Lawsuit



Courtesy of InformationWeek

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Jim Balsillie is betting that the $612.5 million Research In Motion pays NTP to settle a long and bitter patent-infringement lawsuit will have some 5 million customers feeling better about the BlackBerry's future. "We spent the money to ensure certainty," says RIM's chairman and co-CEO. "I would think that went a long way to restore customer trust."

It was a big relief for subscribers. But all the money in the world can't buy RIM certainty, including whether it can keep its lead in PDA sales. Shaking NTP off its back is just half the battle. The $2 billion-a-year Canadian company is in the crosshairs of the much bigger guns of Microsoft and Nokia, while established competitor Palm is proving a quick study on the changing needs of mobile-device users.

What's historically been the BlackBerry's strength--a mobile device expressly for business users--could be a weakness. With so many more professionals purchasing their own PDAs and smart phones for personal and business use, competitive offerings with cameras and cell-phone-like shapes could prove more appealing. In some instances, companies are deciding to let employees choose their mobile devices, with some restrictions, rather than having the IT department purchase and centrally manage them (see story, "Impact Of Consumer Technology Hits Business World"}. The phenomenon has RIM focusing on "prosumer" features--as Balsillie calls them--including instant messaging, voice over IP, and new E-commerce options.

Balsillie: $613 million poorer, but optimistic. -- Photo by AP

Balsillie: $613 million poorer, but optimistic.

Photo by AP
RIM also intends to keep its solid business customer base by offering technologies IT and telecom managers won't find from a consumer-oriented vendor. Last week it acquired VoIP provider Ascendent Systems, and plans to use the company's technologies to turn the BlackBerry into a full-fledged business phone, capable of picking up calls that come into a user's desktop phone extension, checking desktop phone voice mail, transferring calls, and ad hoc teleconferencing. RIM also announced it now supports Cisco Systems' VoIP PBX, Unified CallManager 5.0, allowing CallManager to extend those same kinds of VoIP features to users of BlackBerrys that run on company wireless LANs.

Clean Slate
The NTP settlement came just in time for RIM. In December, the company projected it would have up to 750,000 new subscribers for its fiscal fourth quarter 2006 ended March 4, but lowered that number to between 620,000 and 630,000 in a March 3 preliminary results report. Uncertainty about the NTP suit scared off tens of thousands of potential customers, RIM said. Its revised revenue forecast for the quarter is about $550 million, down from more than $590 million it originally expected.

Balsillie insists the company didn't lose any established customers to the NTP debacle. Among them is Dick Daniels, CIO of Capital One's auto finance division, who has issued BlackBerrys to 300 employees for processing loan applications and checking the status of loans. Daniels says the BlackBerry is an ideal platform for building new business apps, like one he's planning that will let employees access automobile auctions and exchange information with auctioneers.

But RIM's competition is getting tougher. Competitor Palm, which last year had 18.6% of the PDA market compared with RIM's 21.4%, according to Gartner, seems to have gained momentum since adopting Windows Mobile 5.0 as an alternative platform to the Palm OS late last year. Palm came out with the Windows-based Treo 700w and has three more Treo-type devices planned for this year.

Treos beat BlackBerrys in a comparison test to determine which to provide to executives at Trinity Valley Electric Cooperative. "It was based on personal preference," IS manager Ian Fleming says. For one, execs disliked the unique scrolling wheel on the side of the BlackBerry.

The BlackBerry stands out in other ways, too, that some may not find beneficial. For companies to push employees' E-mail to BlackBerrys, RIM requires the purchase of its BlackBerry Enterprise server, priced at between $3,000 and $4,000. Last month, Microsoft released an upgrade that lets Exchange servers directly push E-mail to Windows Mobile 5.0 devices--meaning no investment in middleware for businesses already using Exchange.

Then there's Nokia, which plans to make wireless E-mail a standard application on its new business-class mobile devices. The first model due out within weeks, the Nokia 9300 smart phone, is designed for the business market, says Tom Libretto, a Nokia marketing director. A line of dual-mode phones scheduled to arrive in the second half of this year, the Nokia Eseries, will let users move between wireless LANs and cellular networks without losing a call, says Nokia, and will offer voice-over-IP options, Web browsing, wireless E-mail, and business app support. One of the devices, the Nokia E61, will have a similar look and feel to the BlackBerry, Libretto says.

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