BlackBerry vs. iPhone: RIM takes it up a notch

Makers of the BlackBerry are stepping up efforts to court consumers. On Sept. 11, Research In Motion (RIMM) is unveiling features that make it easier for users to have access to social network MySpace (NWS). The Canadian smartphone manufacturer also plans to announce tools that let subscribers control their TiVo (TIVO) video recorders and view programming that's been saved via Sling Media's (DISH) Slingbox.

A day after T-Mobile (DT) said it will carry RIM's first flip phone, the BlackBerry Pearl Flip, the announcements indicate RIM is serious about winning new converts to the BlackBerry while defending its turf against Apple's iPhone. Apple (AAPL) introduced the music-playing handset in June 2007 and a year later released a version designed to appeal more to business users, traditionally the core market for BlackBerry. RIM has added music and video to widen the appeal of the BlackBerry beyond traders, executives, and other businesspeople who crave constant access to e-mail.

The brewing rivalry between the two brands was recently called a 'knife-fight' by Canada's weekly news magazine Maclean's and has prompted debate among analysts whether Apple's iPhone will clobber the BlackBerry or expand the larger market, to RIM's benefit.

It's not hard to tell where RIM co-CEO Jim Balsillie stands. 'They've stirred up a settled pond, and we've seen our business respond positively,' Balsillie says in an interview at his office at RIM's 22-building campus in Waterloo, Ont. 'There are some consequences, but resoundingly and overwhelmingly, it's been favorable for our business overall.' His point is that Apple's high-profile entry has drawn a lot of attention to smartphones and their capabilities, helping spur demand for devices, whatever the maker.

Loyal BlackBerry owners

Balsillie has reason for optimism. RIM has sold 40 million BlackBerrys to date. At last count, there were 16 million active BlackBerry subscriptions, so there are many loyal BlackBerry owners on their second, third, or even fourth device. An estimate by Gartner (IT) says RIM sold more than 5 million units in the second quarter of 2008.

As many as four new BlackBerry devices will become available from major U.S. carriers in the coming months. On Sept. 10, Sprint (S) announced a version of the BlackBerry Curve that works with its push-to-talk network. AT&T (T) is poised to announce its version of the BlackBerry Bold, already available in Europe and Canada. And enthusiast sites such as the often-accurate Boy Genius Report suggest that Verizon Wireless, owned by Verizon Communications (VZ) and Vodafone (VOD), will unveil a BlackBerry, dubbed the Storm, with an iPhone-like touchscreen in time for the holidays. A fourth device code-named the Javelin may also appear soon, according to sites. Balsillie wouldn't comment on the reports.

Will the new devices be enough to fend off Apple‾ In the workplace, RIM's BlackBerry persists in being one of the most capable devices on the market. And it's no longer just about helping people have access to e-mail. Sure it connects to Microsoft Exchange and Lotus (IBM) for e-mail, contacts, and calendars, but RIM is working on a BlackBerry-friendly customer-relationship management application with SAP (SAP). Its BlackBerry Enterprise Server now includes a voice component that connects to corporate phone systems: When the boss dials your office phone extension and you're away from your desk, you can take the call on your BlackBerry.

Still, Apple could cause RIM a headache in the enterprise.


Last month reports emerged that financial and banking giant HSBC (HBC) was looking to replace its fleet of BlackBerry devices with the iPhone. 'Corporations are under pressure to cut their costs, and Apple and [its U.S. partner] AT&T are looking to cut deals,' says Richard Doherty, head of the Envisioneering Group. 'All the pieces are in place, but Apple is moving slowly.' Indeed, Apple plans to build 45 million iPhone 3Gs by August 2009 (, 8/22/08). The company sold 1 million iPhone 3Gs in the three days after its release, and some analysts say it will have sold 45 million iPhones by the end of next year.

'High-end consumer' appeal

And while RIM is striving to beef up the nonbusiness side of the BlackBerry"”the most popular BlackBerry application is Facebook, which has been downloaded more than a million times"”some analysts question its ability to grab consumers. 'The BlackBerry always has and will remain primarily an enterprise play,' says Richard Windsor, analyst at Nomura Securities in London. 'When I hear RIM talk about consumers, I always think of prosumers, or high-end consumers. I don't expect my mother to get a BlackBerry.' Even so, RIM has lately started a 'Life on BlackBerry' print and TV advertising campaign, touting the device as the must-have accessory for anyone with a busy work and personal life.

Rather than a battle pitting RIM against Apple directly, Nomura's Windsor sees a more interesting fight brewing between RIM and Microsoft (MSFT). While Microsoft has lately been touting lifetime sales of more than 18 million licenses of its Windows Mobile operating system, phones running the software lagged behind BlackBerry sales in the second quarter, Gartner says. 'This is primarily a clash over the enterprise,' Windsor says. 'As yet, Apple and RIM are two largely nonoverlapping circles that are just beginning to overlap at their edges.'

The moment of the smartphone has clearly arrived. Wireless users are ditching their conventional voice-oriented cell phones from Motorola (MOT), LG, and the like for devices that can handle e-mail, music, Web browsing, and can run custom business and consumer-grade applications. Gartner says worldwide sales of smartphones hit 32 million in the second quarter and represented about 11% of all wireless phones sold. But smartphone sales in North America grew at a red-hot 78% during the period, and North Americans bought roughly a quarter of all smartphones sold in the world.

That presents a huge growth opportunity that RIM and Apple can exploit, says Rob Sanderson, analyst at American Technology Research in San Francisco. 'RIM vs. Apple is interesting in terms of investor psychology,' he says. 'But they'll both grow. The market is gigantic and there's nothing but room for both of them to take share from the other players. The knife-fighting days between Apple and RIM are down the road.'

Hesseldahl is a reporter for

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