Research in Motion
ripped off its tie, abandoned the office and headed out for gold rush territory.
The wireless email pioneer is worshiped for its addictive devices such as the BlackBerry, but with fewer than 300,000 corporate customers under its belt, the neighboring mobile-phone market that ships 400 million handsets a year became too hard to resist. After years spent focusing more on corporate server support than on the convergence that is morphing mobile phones into personal digital assistants and vice versa, RIM is ready to cash in, and not a moment too soon for investors.
Over the past two years, competitors
realized that as mobile phones incorporate more PDA functions, a huge new market lay before them, if they could just get their operating systems installed in the new handsets.
A week ago, RIM signaled a similar change of mind, opening up its software bounty to third-party mobile phone and PDA manufacturers for licensing, following its 2001 move to the more neutral Java mobile platform.
Thursday, the company announced its first partner,
, which will make an all-in-one chip to handle RIM's Java and proprietary needs for whatever device maker wants to offer BlackBerry capabilities. RIM has got a lot of territory to make up on Microsoft and Palm, which can explore the combination PDA/phone device realm with large accumulated bands of application developers. With just a chip to attach to its effort so far, RIM investors kept calm in Thursday trading, with shares closing up 2% at $26.52.
"When Nokia signs up, I'll get excited," says Tom Sepenzis, an analyst with CIBC World Markets. Wall Street believes RIM has a high-quality radio to license to partners, but time will tell which handset makers consider the BlackBerry pager-type functionality essential. Email is expected to join text messaging as one of the popular early applications offered on the new higher-speed wireless networks being rolled out this year and next in the U.S.
RIM competitors Palm and Microsoft are already gallivanting into mobile-phone territory with new caller-friendly versions of their PDA operating systems. RIM's arrival in the combination mobile phone/PDA market makes it the fourth well-known operating system provider, behind Symbian (backed by the big handset makers), Palm and Microsoft's PocketPC.
Additionally, each company is encroaching on RIM's familiar territory with always-connected email support this summer. RIM holds that it's miles ahead of rivals, but with only 289,000 subscribers at the end of the quarter ended Dec. 1, 2001, it's time for RIM to introduce its proprietary greatness to a wider audience before the carpetbaggers do.
"RIM's OS is OK, but it's got the best email program you're going to find. There's nothing I've seen that touches it," says Bluewater Capital's Brian Blair. "This opens the door for handset manufacturers to look at the opportunity to incorporate BlackBerry."
Blair expects RIM to unveil consumer-style devices this summer, and he believes that outside vendors will be able to lower prices on RIM devices and make them affordable. The Canadian company manufactures its BlackBerry devices, and although it recently brought a new facility on line, a big partners' manufacturing prowess would be key to reaching a larger audience.
RIM isn't the only company with proprietary technology that is making the adjustment. Mobile-phone giants such as
have conceded that as generic phone makers build cheap models in China and beyond, vendors are best served by licensing their hardware technology for extra revenue. Motorola still will sell millions of phones a year, but it wants a slice of the revenue on millions more.
"I wish they did this two years ago," Sepenzis says. "These days, he who licenses his technology the most wins."
RIM announced a general packet radio service phone in March to be released at a later date, which means Nokia and Motorola will have their first third-generation handsets out about the same time (albeit for operation on more complicated networks that could face significant glitches). RIM still has time to catch up, but it's a good thing it's finally scouting some partners before the bonanza passes it by.