Categories: Business

Is the iPhone killing RIM?

The BlackBerry is under attack and RIM’s giving the fight everything it’s got

by Colin Campbell on Friday, August 14, 2009 3:00pm - 25 Comments

Perhaps most worrying of all for RIM is the potential erosion in sales among members of the next generation. According to a survey of future smartphone buyers, 44 per cent now say they are planning to buy an iPhone, while just 23 per cent say they would buy a BlackBerry, according to ChangeWave. Those numbers may partly be a result of the timing of the survey, which was done at the same time Apple released its new iPhone 3G S, but the threat from Apple is growing quickly as it slashes prices (you can now get iPhones for $99 with a three-year contract), adds new carriers, and improves the look and functionality of its phones. “Truth be told, the real darling is the iPhone hardware design. Nothing can touch it,” says Levy.

Apple is also beating out RIM in the emerging market of third-party smartphone applications. It has been just a year since Apple launched its online App Store, but there are already over 50,000 applications and counting, and the site boasts more than a billion downloads. The variety of applications has made the iPhone more appealing to consumers, and Apple has demonstrated that smartphones are about a whole lot more than just emailing and browsing the Internet. RIM has launched its own app store (which has a few thousand apps), but analysts say that Apple’s lead in this area may simply be insurmountable.

RIM’s best bet may indeed be to focus on research into new wireless network technology, but so far it’s not going all that well. Most observers say the odds of the government intervening in the Nortel sale to award the patents to RIM at this late stage are small. After all, the LTE patents are simply being leased—not sold—to Ericsson. However, it’s conceivable that RIM could pursue its strategy through other means. Nortel isn’t the only company developing LTE, and RIM still has plenty of cash on hand for acquisitions. Of late, RIM has been buying patents and intellectual property at a great rate; it has spent $1.3 billion on patents over the past two years, according to a report by Genuity Capital Markets analyst Deepak Chopra.

But will that be enough? Most observers expect that over the coming years Apple will continue to pick away at RIM’s business market, leveraging its sleek looks and status to win over the suits. “It’s still a two-horse race,” says Levy, but just like there’s only room for one Coke, there may only be room for one true smartphone leader with a brand and design strong enough to make consumers swoon. Right now, it looks like that brand will be the iPhone.

A few weeks ago, Blodget wrote an update about his breakup with the BlackBerry. Despite a few frustrations, he said, “I’m still happy I bought the iPhone.” There’s no getting away from the fact that people who use the iPhone just seem to like it better. Experiences like that will be pretty tough for RIM to overcome.

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Tags: Apple, BlackBerry, Henry Blodget, iPhone, Jim Balsillie, Mike Lazaridis, Research in Motion, RIM

More by Colin Campbell

Dot

Very interesting. Good analysis.
http://intensedebate.com/people/danby danby

With business obstacles like these on the horizon, why would Balsille want to throw money away on a hockey franchise?

Bettman is no friend of Big Jim, but he is probably doing him a favour by sqeezing him out.
http://www.intensedebate.com/people/danby danby

With business obstacles like these on the horizon, why would Balsille want to throw money away on a hockey franchise?

Bettman is no friend of Big Jim, but he is probably doing him a favour by squeezing him out.
Stephen

The big threat to RIM is if access to corporate email becomes "just another app". This is RIM's bread and butter.

Not only would that open up things to more consumer appealing handsets but also be a major threat to the RIM infrastructure, which allows them to get a monthly fee out of the carriers for each subscriber.

They are in the fight of their lives, as they have been from the day they got started. Beat palm, beat Microsoft, beat Nokia and host of smaller players.

At the end of the day they need to make great phones that people will want, like what Apple does. They do great things, they make great radios, nobody is better than them at making the battery life as long as it can be.

They will be throwing everything at it because they need to and they know it.
Terren

Whatever, Blackberries are much better
http://intensedebate.com/people/NorthernPoV NorthernPoV

iPods die young
I'll bet iPhones do too
uber cool products but ….
business values reliability above all for this product/service
RIM will do just fine
MikeB

While it seems touch screens are still all the rage in the smartphone segment, am I the only one who has noticed that it has waned in the "dumbphone" in favour of the QWERTY keyboard?

Aside from the fact that the iPhone IS a really great consumer market phone, I think the big reasons that it's the darling of the mobile world lately are:

a) Apple has already convinced the masses (and tech geeks) that it's cool

b) It's established itself as the platform of choice for mobile developers.

I think those are two things that RIM has to consider, and to their credit I think they know that. It is also worth noting that Apple has even stumbled on part B of that equation with the whole Google Voice brouhaha. It's the vibrant developer community that really makes the iPhone what it is, so Apple really needs to careful with that, before developer start moving to Android or Palm's WebOS en masse.

LB_

Rim's OS is also beginning to show it's age and with push API's becoming the norm it's not hard to see Blackberry losing their edge.

The only thing they have going for them is the great set of IT tools thank make it easy to manage large scale deployments, once others catch on I think RIM will be in serious trouble.

Cedric

It's seems that only the consumers wil win in this area. Now it's time for the provider (Telus,Rogers, Bell) to drop the price of the package that is huge compare to the US user!
http://intensedebate.com/people/adb215 adb215

I love my Blackberry but it not very compatible with my Mac. There is a third party software for syncing but it works only some of the time. Develop software for Macs and make Backberry's WORK with a Mac. Then I won't be so tempted to jump ship.
Michael Mitchell

I did my due diligence and decided to get a Storm over an iPhone recently. I couldn't give Rogers my money. I'd heard enough stories about the gouging of the iPhone charges, perhaps unfounded. Still, for my purposes (minimal need for phone calls, some texting, some surfing, not a ton of usage each month, more for an emergency), I decided the BBerry was the way to go. I do have a Mac and an iTouch, though. Just didn't go that route for the phone.
Bill

The author of this article obviously lacks any meaningful understanding of the telecom industry or RIM's products or business. Plus, RIM has been knocking it out of the park for 10+ years and plenty of articles like this (predicting RIM's demise) were written during every one of those years. Apple has done well, but the reality is that Apple has done well at the expense of Microsoft, Nokia, Palm, Samsung, LG and others. And RIM has actually done better every year since Apple arrived. Don't let this kind of thin "journalism" taint your view. In the real world of business, you would kill to have RIM's position and momentum. And a two horse race in a growing market is a beautiful thing for both horses. The author has been either blinded by hype or simply believes that naysaying will appeal to the inferiority complex lying deep within the Canadian psyche (which is a false and archaic theory by the way). Either way. This article completely misses the mark and appears to have been formulated by simply stringing together a handful of facts and opinions without an actual understanding of the industry (something I used to do when writing papers in school). Macleans should do better.

Dot

Bill, your points are valid if the target market segments are growing at the same rates as the "10+ years". And as products mature, there tends to be convergence – ie little to differentiate competitors.

I haven't looked into the business-industry/consumer goods segments specifically, but I suspect the penetration rates for cell phone/smart phones are pretty high.

Got any data to support your critique?

Marty

Penetration for cell phones is high, but the penetration of smart phones is still pretty low, relatively speaking. I agree with Bill. I don't have the data handy, but it seems to be a widely held belief that there is a lot of room left for growth in the smart phone maket, and to be fair – I don't see any data in this story either that would back up its overall theory or its weird title. If RIM is being "killed", then kill me now. Bill is right. I would love for my business to be as successful as RIM's. They are growing and the market is growing and they are still really profitable. I guess I just don't understand why RIM and Apple won't both be successful for at least the next 5 years.
G Betts

The funny thing about this article is that it comes out at the EXACT MOMENT that (American magazine) Fortune Magazine names RIM the FASTEST GROWING COMPANY IN THE WORLD. Sorry for the caps, but sometimes I get annoyed by Macleans taking an anti-Canadian spin on a story. Think about it — the fastest growing company in the world, and Macleans response to this astonishing success story is… doom and gloom.

Is this the typical Conservative I-hate-everything-about-Canada crap or what?

Dot

I suspect you read the same article as I did in today's G&M ROB, pg B5: RIM's growth snags global recognition..
http://www.theglobeandmail.com/report-on-business…

Ironically, on page B1 there was a complementary article: iPhone hard to find? Sorry, there's no app for that.
http://www.theglobeandmail.com/report-on-business…

Frankly, I think you're being unfairly harsh on Macleans. The title asked a rhetorical question: "Is the iPhone killing RIM?". I don't see anywhere in the article where it claimed it was, but gave a good description of the highly competitive smart phone market, and explained the reasons for some of RIM's recent moves.

What precisely in the Macleans story do you find so offensive?

Dot

From the second article, B1:

Apple Inc. is shipping limited supplies of its smart phone to Rogers Communications Inc., the only Canadian wireless operator able to carry the device, as the California company scrambles to try to meet global demand that appears to have exceeded its own forecasts…."If you're in short supply and the smart-phone companies are [fighting] it out in a war, you want to protect your beachhead. You want to be able to fight the battle in the most important areas of the world, and quite frankly that's the United States. You've got to reserve your supply for the biggest battle grounds," Mr. Restivo said. "Rogers can't be thrilled about the supply situation."
Dot

So, it seems to me, the consumer goods market for smart phones is growing, RIM by moving into the consumer goods market (from predominantly business/gov't/industry) has increased its sales (with lower margins), but at the same time has a wider range of competitors, and it's dominant position in the secure business segment is either holding its own, or it is losing market share. And Apple's share is being constrained by lack of adequate manufacturing capacity.

G Betts

It's possible that I was being unfairly harsh — I had just finished reading columns by A. Coyne and Mark Steyn in sequence, which always set my blood boiling. Canada and Canadian companies are always wrong to them. But this article manages to find a negative slant to one of the most incredible Canadian tech stories of the millennium. Why not explore their incredible contribution to Waterloo, Ontario, or Canada? Instead we get a constant barrage from Coyne about Canadian companies not funding research compared to foreign companies in Canada. Of course, it's a comparison done in bad faith — small Canadian companies, like for instance the Big Bee chain of stores, don't do research and shouldn't be compared to companies like Toyota or Siemans. Compare Canadian multinationals to foreign multinationals and you discover that these Canadian companies do far more R&D in Canada. But that would make Canada look good, which is apparently not an option to some writers. In a similar way, this article finds a negative slant to highlight a problem that might potentially possibly exist. It's sort of like complaining about Gretzky's performance circa 1983.

Dot

Well, before Coyne wrote his latest blog on RIM and Arrow , I was quite critical of RIM's move to seak intervention before the Parliamentary Committee on one of ITQ's blogs. Yet, I don't downplay the success of RIM and its co-founders.

See here:

http://www2.macleans.ca/2009/08/07/itq-committee-…

(you need to open some comment links near the bottom – Wascally Wabbit's)

Gabe

3 Cheers to G Betts comment! I just recently bought a 8830 Curve after retiring my HTC Touch, which was a phenomenal phone for web browsing and Apps.

But what a world of difference on a BB. the functionality is very impressive. I spend hours a week on crackberry.com discovering more uses. The best part is, this is a Canadian company, built in Canada, and is pushing the envelope everyday.

I have friends with iPhone. In a two horse race, the iPhone is a one trick pony. If you want a glitzy trendy phone, so you can amaze people with it's silly apps, fine buy an iPhone. I hate to say i told you so when you struggle to type on that touch screen keyboard, or the digital screen starts to wear out.
If you want a serious business phone, you can email, and BBM quickly, not to mention sync with the corporate intranet. Then get the far superior and ever evolving Blackberry
Dot

So, let's look further into the G&M stories. From the first, B5:

RIM holds a 56-per-cent share of the $12-billion (U.S.) – and growing – American smart-phone market, and is expected to see three-year average earnings per share growth of 84 per cent and revenue growth of 77 per cent. Fortune says this is largely on the strength of RIM's foray beyond the corporate world into the highly competitive consumer market.….However, Fortune warns that RIM's competition from the likes of Apple, Acer, Dell and Motorola is "getting increasingly stiff" and RIM will have to work hard to keep up with changing consumer demands.
Dot

Oops : seek
Jasper

I disagree that RIM needs to come out with a better touch screen phone. I think the keyboard is one of their strengths. What I think RIM needs to do is come out with a phone that features a far better browsing experience (and if they can combine that with a truly superior camera and a great MP3 player, all the better). I personally use an iPhone, but I'm not crazy about the touch screen, and I've talked to LOTS of iPhone users who feel the same way. The reason we use the iPhone — and the reason so many people (like my brother, for instance) are switching from Blackberry to iPhone — is the latter's vastly superior, PC-quality web experience. For lots of folks these days, a web browser is a more important feature than the phone itself. Anyway, the first vendor that comes out with a truly superb handheld browser/phone that comes WITH a true QWERTY keyboard will have my business.
http://intensedebate.com/people/madeyoulook madeyoulook

Is the iPhone killing RIM?

Ah well, then. Time for another multi-billion dollar bailout, I guess…