Dell Wants to Grace RIM's Pager With His Name

Michael Dell flipped over RIM's Inter@ctive pager and is said to be in talks with the Canadian company about an OEM deal.
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Michael Dell

likes this little gadget so much he may want to stamp his brand on it.

Wearing a beeper may not be hip any more, but the hot little toy of the moment -- a two-way pager with a micro-keyboard that allows email -- looks set to change all that. A significant number of tech-savvy people who can't live without their emails are lusting after the RIM Inter@ctive pager from Canadian firm

Research in Motion

(RIMM)

.

The cigarette pack-sized $350 RIM Inter@ctive pager lets users access the Internet to send and receive messages of up to 16,000 characters or several pages of type, email and faxes. Though only the size of a pager, it packs a tiny keyboard and a mouse. All you need is deft thumb work. And through a RIM service called

BlackBerry

, users with Microsoft Exchange email servers can get home and office email forwarded to the RIM device.

This makes it a true tech object of desire. No wonder that in addition to

Dell

(DELL) - Get Report

executives, Bill Gates and

Microsoft

(MSFT) - Get Report

President Steve Balmer are also reported to be RIM fans.

And it's carried by some of the most influential people on Wall Street.

Hardcore RIM enthusiast Bill Crawford, who follows RIM for

Merrill Lynch

, admits he's addicted to the device. (Merrill Lynch has no banking relationship with RIM.) "The whole financial community is embracing this product. Because we tend to think we are so damn important, information has to get to us at all times," says Crawford, who has an accumulate rating on RIM.

Dell executives are exploring a deal to put the Dell name on a crop of RIM two-way beepers, according to sources familiar with the discussion between the two companies.

Dell executives have already asked

Jim Balsillie

, RIM chairman and co-CEO, to consider having the Dell name instead of the RIM name on the devices in an original equipment manufacturer, or OEM, agreement.

A RIM official confirmed that the company has talked with Dell and other manufacturers.

"These are simply ongoing discussions," says Dave Werezak, RIM's vice president of marketing. "There is nothing we could announce at this point." Dell officials declined to comment.

The deal would give Dell, the world's No. 2 computer maker, an entry into the wireless data communications market. And for Waterloo, Ontario-based RIM, it would open up an enormous sales market built in conjunction with Dell's brand.

Many RIM users say they have become so reliant on the service that they can't imagine how they ever got by without it. David Granoff, a director of systems and operations at the

New York Mercantile Exchange

, has three RIM pagers, one for himself and two for members of his family, one of whom is deaf. Granoff says his cell phone and even his watch are optional equipment but he never leaves the house without his pager. "If I take my wallet and keys with me, then I take my pager," Granoff says.

Fidelity Brokerage Services

offers its active trading clients and customers with a $100,000 minimum balance an InstantBroker service via the RIM pagers. The service provides real-time quotes and trading functions. Approximately 5,000 clients have signed on to the service since its launch in October.

For the first quarter ended in May, RIM saw its profit soar 250% from year-ago levels to US$1.8 million. In the same period, the company reported revenue of US$16.3 million, a 171% increase from a year ago.

Though fashionable with the techie crowd, some wonder if the RIM obsession will catch on with the general public.

"However much I might like it, I think the broader market just doesn't care," said Scott Miller, a RIM user and analyst with

Dataquest

in San Jose, Calif.

The stock has jumped 86% since it was listed on

Nasdaq

in February. On Friday, the shares closed the trading session up 2 1/2, or 12.6% at 22 3/8.

More than 75% of RIM's revenue comes from its line of two-way pagers. It is the leader in the keyboard-equipped, two-way paging market but faces a formidable competitor in

Motorola

(MOT)

, which offers a similar pager. RIM is also vulnerable to other wireless data devices such as

3Com's

(COMS)

Palm Pilot and

Nokia's

(NOK) - Get Report

new smartphone.

The two-way paging market is minuscule compared to cell phones and Palm-type handheld devices. In 1999, there are expected to be a half million two-way pager subscribers, compared to the 2.2 million Palms and clones that will be shipped this year, according to Dataquest figures.

RIM shipped 225,000 pagers in fiscal 1999 (ending in February), but is expected to ship half a million units for fiscal 2000, according to Merrill Lynch estimates.

"I'm hesitant to say they are going to go the way of the buffalo, but they are going to see competition from other devices," Dataquest's Miller says. "RIM's challenge is to compete on a broad-based level and/or leverage their core technology into other devices."

That's why the Dell partnership will be hugely valuable.

RIM doesn't have to be used by everyone to be wildly successful, Merrill's Crawford says. "If, for example, RIM gets a small portion of the Microsoft Exchange users -- say 20% of the 20 million users -- it's a successful stock."