RIM Eyes Consumer Game

Even as his company's stock slid almost 5.5 percent on the Nasdaq in the wake of a disappointing quarterly earnings report, BlackBerry CEO Jim Balsillie sounded an optimistic note today, saying that, while subscriber growth may remain soft for the next few months, success later this year will come from an unexpected quarter: the consumer market.

Analysts debated the wisdom of that strategy, and the meaning of RIM's earnings report, after the Waterloo, Ontario-based maker of the popular BlackBerry device said it added 625,000 new subscribers in the fourth quarter of 2005 and estimated revenue and new-sub numbers for the coming quarter well below Wall Street estimates. (See David Heit, Sr. Product Manager, RIM.)

Some analysts, like Goldman Sachs & Co. 's Brantley Thompson, maintained their bullish ratings on RIM stock, mainly because of BlackBerry's elegant functionality, the continued growth in the corporate mobile email market, and the brand loyalty built up by BlackBerry in its seven years of market dominance.

"We did see RIM rollouts go into a holding pattern as press reports of RIM's impending shutdown reached a crescendo," says Avi Greengart, principal analyst for mobile devices with Current Analysis. "With the resolution of the NTP lawsuit, RIM's earlier momentum has resumed, and BlackBerry rollouts are 'on' again."

Greengart also points out that makers of potential rivals to BlackBerry have hit snags of their own: "Motorola Inc. (NYSE: MOT) has not been able to deliver the Q on its original schedule, Nokia Corp. (NYSE: NOK) has slipped the E61, HP Inc. (NYSE: HPQ)'s 6515 arrived months late with an outdated OS, and Samsung Corp. 's somewhat clunky QWERTY phones have not been embraced in the market."

Others, however, wondered if this report marks a turning of the tide, as competitors assail RIM in its core market and as Windows Mobile 5.0, which features a free push email upgrade to Microsoft Corp. (Nasdaq: MSFT)'s Exchange Server, gives IT managers a clear alternative to the BlackBerry. (See Microsoft's Push Comes to Shove.)

Pointing to the relatively small fraction of corporate email users that use BlackBerry or other push email, many observers forecast strong growth for RIM, as well as its competitors over the next two years as IT departments push mobile email out to employees beyond the executive suite. RIM says its subscriber base grew to 4.9 million over the last three months.

But skeptics like Andrew Neff, an analyst at Bear Stearns & Co. Inc. , believe that the corporate mobile email market may have plateaued, for the moment.

"While potential for wireless e-mail may be very large," Neff wrote in a research note today, "the issue is what price of service/handset is required to rejuvenate growth."

Agreeing with Neff is mobile operating-system provider (and RIM competitor) Symbian, which has launched a "mobile email validation program" to establish clear industry guidelines that the company hopes will help drive push email beyond its current cadre of elite users. (See Mobile Mail Markers.)

"We think there are still significant barriers to [enterprises'] adoption of mobile email," said Andrew Moran, Symbian's head of enterprise market development, at the CTIA Wireless show in Las Vegas on Thursday. "The question for us is: What will it take to overcome those barriers?"

Balsillie, for his part, maintained the bland optimism that has characterized his public pronouncements since RIM's patent dispute with NTP Software, settled last month, began to weigh on his company's performance. While asserting that growth in RIM's traditional enterprise market will remain strong, Balsillie says that new, consumer-oriented devices will bolster BlackBerry's growth in coming years.

"Instead of going to a corporate intranet site to check sales," Balsillie told the Canadian Press this morning, "you're going to a game site to play a game."

— Richard Martin, Senior Editor, Unstrung

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