For years, Research In Motion's BlackBerry wireless pager inspired unrivaled loyalty among business folk on the move. Clipped conspicuously to an executive's belt holster, it was a symbol of upper-rung status in corporate hierarchy. Increasingly, however, e-mail and entertainment devices like Motorola's (MOT) Q, Palm's (PALM) Treo, and Nokia's (NOK) E61 have stolen the limelight from BlackBerry's all-work, no-play models.
RIM (RIMM) is preparing to regain some of the glow. The company plans to launch an ultra-thin, phone-like device dubbed BlackBerry Pearl in mid-September with Deutsche Telekom's (DT) U.S. wireless unit T-Mobile. Another version, with Cingular Wireless, is due later in the fall.
In a major revamp of its business model, Waterloo (Ont.)-based RIM will pitch the new Pearl to regular, gadget-loving consumers as well as harried executives. About the same size as Motorola's popular RAZR phone, the Pearl will have a built-in digital camera, Bluetooth wireless capability, and a memory card expansion slot to handle music and video.
GROWING MARKET. With Pearl, RIM is jumping from one increasingly crowded arena into one that's even more competitive. Wireless carriers, noting that even soccer moms now are managing their personal lives by mobile e-mail and text messaging, have been pushing RIM to create products that are more consumer-friendly. "We see demand for a good e-mail device that does consumer multimedia services," says Jeff Bradley, vice-president of business data services at Cingular Wireless, the biggest seller of BlackBerry handsets. "That's something we're committed to providing."
RIM executives declined to comment, but at several wireless conferences this year, co-CEO Jim Balsillie has vowed to put multimedia features into BlackBerrys by the end of the year. RIM has to branch out if it's going to meet its goal of adding 10 million subscribers to a current roster of about 6 million. "There's lots of competition, but this sector is dramatically expanding," Balsillie said in San Francisco earlier this month.
RIM is betting the best defense of its lucrative e-mail niche is a strong offense against Motorola, Nokia, and other cell-phone making giants. The trick is mapping the right strategy. Traditionally, the company has focused on corporate customers who wanted the most secure way for executives to use e-mail and business applications using wireless.
MULTITASKING. RIM was the first to offer such services, and it appealed to corporate tech managers by providing a "closed" platform—meaning individual users couldn't easily install software that might contain viruses, pornography, or other troublesome content.
Palm and Nokia then beat RIM into the multimedia realms of music, pictures, and video. But corporate clients mostly stuck with RIM because "they weren't asking for multimedia," says Christopher Callender, group manager for smart devices at Sprint Nextel (S). "They were still concerned about how to contain their data and keep it secure."
Since January, however, RIM has seen its market share of corporate e-mail activations slip five percentage points, to 59%, even as the overall market continues to grow, says analyst Clifford Raskin at Strategy Analytics. That's because products such as Motorola's Q and Palm's Treo, which already let users take pictures and listen to music, are attracting users who want a fashionable device they can use both professionally and personally. "RIM has to play in that arena, and for those businesses that aren't concerned about bulletproof security, the [new] device will find a welcome home," Raskin says.
SWEATING IT OUT. Cellular companies that don't have deals with RIM doubt the BlackBerry can expand its sphere of popularity. Nearly two-thirds of BlackBerry's current customers opt for a second, regular cell phone, according to surveys. In other words, users don't really see BlackBerrys as do-everything gadgets. RIM's detractors note that the new Pearl has neither the touch screen nor the full-size keyboard consumers seem to prefer for navigation. Instead, it uses a technology RIM calls SureType, which squeezes two letters on one key and uses predictive software to determine which letter a user actually wants. It's fairly accurate but takes some getting used to.
If RIM was starting to feel the heat in the corporate market, the consumer market may seem sweltering. With far more players selling consumer gadgets, price pressure is intense and the pace of innovation is swift. Stefane Maes, director of product development at Palm, says the company will begin selling a revamped version of its Treo this fall.
More software choices from Palm will put even more pressure on the BlackBerry. Says Maes: "While RIM has done a fantastic job in the e-mail space, it has played second fiddle in the phone market." Now, if RIM doesn't watch out, BlackBerry could feel the big squeeze.
Edwards is a correspondent in BusinessWeek's Silicon Valley bureau and Crockett is deputy chief of BusinessWeek's Chicago bureau
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