Special Reports

RIM Atop The Smartphone Heap

The Blackberry maker so far has maintained its lead in the smartphone segment, but Apple and Google present worthwhile challenges that keep RIM working harder to stay at the top.

• By Jabulani Leffall
• June 15, 2010

At age four, Mihalis Lazaridis made a model phonograph out of Legos. By eight he'd taken those same blocks and made a working pendulum clock. Then at the ripe old age of 12, he won a local library award for reading every science book on the library's shelves.

In this sense, Research In Motion started as a concept long before the advent of the company and its flagship Blackberry smartphones.

Today Lazaridis as CEO of RIM Inc. is just as busy watching the pendulum swing from the mobile handset to that of mobile computing. In a way, Lazardis and his company are still looking to stack the building blocks of strategic development to retain market dominance in the smartphone space.

Despite dominance, telecom and technology experts say Blackberry's challenges in the market are anything but child's play.

It's been a busy June so far, as Research In Motion settled with Motorola Inc., agreeing to pay an undisclosed amount to settle their battle over patents to wireless technology.

It made sense to settle to maintain continuity as the top player in the smartphone marketplace, particularly in the enterprise space according to analysts.

"What's behind (RIM's) success is that they've been in this game for years," said Brian Marshall, managing director and senior analyst with Gleacher & Co. "They penetrated the market with a secure solution quickly, a secure and efficient device for a mobile communication, which is what makes RIM such a mainstay in mobile business computing."

According to researcher iSuppli Corp., RIM's BlackBerry surpassed Motorola in global unit sales last quarter. Motorola, of course, makes the Droid device, which runs Google's Android OS.

In the same week of the settlement with Motorola, RIM launched BlackBerry App World for the Japanese market and launched the 3G version of its compact handset, Pearl, in India.

Additionally, RIM rolled out the Blackberry Bold 9650, which ships with the Blackberry OS 5.0, just as it also announced the forthcoming BlackBerry OS 6.0. The company is prepping version 6 for third-quarter delivery.

This constant, strategic motion puts RIM in an extremely good position for business customers, according to most industry analysts.

RIM has 400 international carrier partners, compared to an estimated 150 international carrier partners for Apple Inc. and its iPhone.

"It's just a huge big install base for them right now," Marshall said. "The only problem I really see -- if you can call it a problem -- is increased competition from the new media angle of smartphones and this is being driven by Apple and Google."

Marshall referred specifically to the growth in mobile applications on Apple's iPhone and Google's Andriod smartphones that he says have made RIM appear to be "behind the times."

"That application train has left the station so to speak," Marshall adds. "While (RIM) is behind in terms of migration of media and applications they still have the brand loyalty and are uniquely and firmly entrenched in the business user experience."

RIM's View from the Top
Even in today's smartphone arena, where product launches are moving at breakneck pace, the elder statesman and leader remains RIM. RIM has the leading mobile smartphone OS platform in the U.S. with 42.1 percent share of U.S. smartphone subscribers, as of February, according to ComScore, rising 1.3 percentage points versus the prior period.

Apple comes in second with 25.4 percent share followed by Microsoft, which has various hardware partners for its mobile OS, at 15.1 percent, and Google at 9.0 percent (up 5.2 points) with the most growth. Palm, which just launched the Pre, is at 5.4 percent of the market.

Experts say this view from the top could change, not with RIM falling anytime soon but with the expanded horizon of new players and alliances that will definitely change the scenery.

Dell, Lenovo, HP, Samsung and LG have all in recent months flirted with the idea of putting their own research in motion, so to speak, on how to break into an increasingly crowded field.

"The primary competitive advantage of the smartphone is the ability to respond rapidly and gain consensus quickly among stakeholders when conducting business," said Phil Lieberman, president of Lieberman Software. "You can also use the phone to impress your clients since your company can buy the latest and greatest phones and therefore has more style than your competitors."

And it's style, according to Lieberman and others, that may make some of the difference going forward.

"Smartphones have also become political and religious symbols about coolness, power, and style that can both help and hurt depending on what camp two parties are from," Lieberman added. "For example it's almost a clash of cultures with Apple iPhone, vs. Blackberry vs. Windows Mobile vs. plain old cell phone."

'Coolness' and RIM market share
Telecom analyst and business book author Jeff Kagan prefers to call the smartphone industry an "adventure" rather than a mere business segment.

In this vein, Kagan thinks RIM should be looking at it the same way. He says even though the "cool factor" is simply a draw to a business or consumer buyer and not the final straw in enterprise adoption, it is nevertheless an important part of salesmanship for RIM and its competitors.

"There are lots of business customers who love Blackberry and find it efficient," he said. "But they're always looking over at the other guy's phone comparing notes and looking at ease of use and features. This smartphone adventure is brand new and we'll see more competitors and more exciting devices and more features and speed and this is what not just RIM but all its competitors should be considering."

Karl Weintz, senior VP of corporate development and strategy for ActivIdentity, says that the field is still wide open for smartphone companies looking to tap the business market, given the fact that there are still many limitations to business use from a computing standpoint.

"Even with e-mail being the core mobility application, most smartphone platforms can't provide encryption and digital signatures that compliance requirements demand from many financial service and government organizations, to name a few industries," Weintz said.

Nevertheless, it's certain, as analysts Kagan and Marshall point out, that the smartphone business is light years ahead of where it was last year and will be eons ahead of where it currently is, this time next year.

"If RIM wasn't so strong in the business market they might be hurting right now," Kagan said. "The question is, what's going to happen next? Will they continue blowing the roof off this market or will they start to struggle? Along with that, we have to ask, 'are they going to innovate and if so, how?'"

For his part, Gleacher & Co.'s Marshall said the market is large enough to support various smartphone makers as well as smartphone app developers, and new innovations as the smartphone market is just now only about a quarter of the total handset market.

"But what happens in the future will be interesting for sure, because sales of smartphones are growing 35 percent annually, and that's not going decelerate for a few more years."