BlackBerry Branches Out
By Joachim Bamrud, Tue Jun 04 00:00:00 GMT 2002

The BlackBerry expands beyond North America and basic messaging solutions.


The BlackBerry, the messaging device that has had a phenomenal success in the United States the last couple of years, is now taking two major steps: First, it's "growing up" to include GPRS, voice and more advanced data capability. Second, it's becoming a global product thanks to recent agreements with operators in Europe and Asia.

"We see growth not only from geographical expansion, but also including all kinds of corporate data that currently resides behind the firewall," says David Werezak, vice president of marketing for Research in Motion, the Canadian company behind the BlackBerry.

The first two versions of the BlackBerry, the pager-sized 950 and palm-sized 957, offered basic messaging capability. With its 26-button keypad, e-mail alert system and ability to download and install Microsoft Outlook and Lotus (and related address books), the device caused a sensation among users, many of whom have grown so addicted to it they call it CrackBerry. All in all, more than 320,000 subscribers and 14,400 organizations in North America use the BlackBerry, according to RIM officials.

The BlackBerry accounts for 67.5 percent of the U.S. "keypad" device market, which totaled 519,000 units shipped last year, according to IDC analyst Alex Slawsby. Only some 4,000 units were shipped internationally, he says.

Enhancement and Expansion


In March, RIM launched the BlackBerry 5810, which adds voice, SMS and GPRS and uses Java 2 Micro Edition as its core operating system. "With Blackberry 5810, RIM has made a long-overdue enhancement to its products," Gartner analyst Ken Dulaney says in a recent report on RIM.

Other analysts say the new applications provide mixed benefits compared with the original. "This is a data-centric device and voice gobbles up battery. [That's] not a good trade-off when everyone has a phone anyway," says Paul Coster, an analyst at JP Morgan. "GPRS is essential for richer data experiences, including pull web-based access and client-server applications."

Meanwhile, RIM has been aggressively expanding beyond its core North American market. During the first five months this year, the Canadian company has announced partnerships with six European carriers and two leading Asian operators. That follows RIM's partnership with BT Cellnet in June last year.

The European carriers include Italy's TIM, Vodafone UK and Germany's T-Mobile. The Europe expansion will come from further carrier agreements as well as making sure the BlackBerry works through GSM and GPRS roaming, according to Werezak. "We're still working aggressively to expand our presence in Europe," he says.

In March, mm02 (the new name for BT Cellnet) announced that it had signed more than 250 corporate clients for BlackBerry in the UK, Netherlands and Ireland. UK clients include more than half of all law firms in City of London and a large number of blue-chip banks, finance houses and IT firms, according to RIM. "We're very pleased with the progress [in Europe]," says Werezak. "We're pleased that GPRS continues to deploy."

Packet Data Helps BlackBerry Grow


In fact, he says, GPRS is key to the success of the BlackBerry in Europe and Asia since it provides an "always-on" connection which enables a recipient to know instantly when they get a new e-mail. "Without packet data, the BlackBerry is not economical to run over networks," he says. "GPRS or packet data is really the breakthrough. As packet data gets deployed, that's what's critical for us."

In Asia, RIM signed a deal with Hutchison Telecom in Hong Kong which on May 6 became the first operator in Asia to offer the BlackBerry. That partnership also calls for getting the RIM device into mainland China as well, a potentially huge market for BlackBerry. And on May 30, RIM announced an agreement to distribute the BlackBerry through Australian operator Telstra.

Unlike in Europe, RIM plans a more limited expansion in Asia, according to Werezak, who declined to say which markets the company was looking at beyond HK/China and Australia.

Despite RIM's ambitions, the Canadian company will face stiff competition in both Europe and Asia from more-established rivals such as mobile phone producers, analysts say.

"Our feeling is that devices that come from a strong heritage in the mobile world will get a stronger reception from the public than products aimed at the corporate segment," says Slawsby. "The target audience for BlackBerry products are business professionals and enterprises [while] the Nokias and SonyEricssons are more focused on the individual person."

That being said, he believes RIM can do well within the very specific niche audience of enterprise users, which is the main focus of mm02's BlackBerry service, for example. RIM officials themselves believe their strong U.S. position also helps them in such markets as Europe, where many U.S. multinationals are eager to use the BlackBerry product they know from home.

The new international deals are expected to significantly boost RIM's global market-share and lessen its dependence on the North America market where it is starting to face competition from competing devices like the Palm i705 and Handspring Treo and competing software provider Good Technology.

"Without a global market, RIM's opportunity would be very limited," Coster says.

Competition


Good Technology uses Blackberry hardware, but provides an alternative software and in may managed to take away one RIM customer, Cingular Wireless, the news of which resulted in a 12 percent drop in RIM's share price.

However, Good Technology still has a way to go before catching up, RIM and independent analysts say. The California company currently only has some 20 clients. It also doesn't offer a complete alternative to RIM, according to Dulaney. "Good's limitations in applications and development could present a problem for customers that may have RIM-specific applications beyond RIM's baseline functions," he says.

Partly to offset any other future rivals, RIM in April announced plans to offer the BlackBerry reference design to third parties.

The global expansion hasn't been without a price. Analysts say the costs involved have affected the bottom line, already impacted from the U.S. economic slowdown. For the fiscal year that ended in March, RIM reported a net loss of $28.5 million, more than four times higher than the $6.2 million loss a year earlier and the net income of $10.5 million in fiscal year 2000.

Revenues, however, keep growing. For the fiscal year that ended in March, revenues reached $294.1 million, an increase of 33 percent from the previous year. Rim expects revenues between $375 million and $425 million in the fiscal year that ends in early 2003.

However, despite the international expansion, both RIM and independent analysts expect the United States to remain the top market. "Due to the pervasiveness of mobile phones worldwide...the BlackBerry will continue to have higher success in the U.S. than in Europe and Asia," says IDC's Slawsby. "There will be some success, but they will sell more to a niche market than in the US."

Europe and Asia may reach as much as 20 percent of RIM's total sales in the near future, with the U.S. market still accounting for the lion's share, Slawsby estimates. "Certainly Europe and Asia are becoming more important for us [but] the U.S. is still very much a market we're focused on," says Werezak.

Joachim Bamrud is an award-winning journalist with 17 years experience as a writer and editor in the United States, Europe and Latin America. Bamrud has worked for various print, broadcast and online media, including Latin Trade, Reuters and UPI.