BlackBerry-maker Research In Motion Ltd. faces a range of obstacles, both major and minor. But one challenge overshadows the rest, according to Mike Lazaridis, the company’s president and co-chief executive officer.
“RIM’s biggest competitor is ignorance,” Lazaridis said. “Our challenge continues to be and has always been getting someone to try it.”
Because, Lazaridis asserts, once you try BlackBerry, you can’t go back.
Indeed, the device has earned the nickname CrackBerry from enthusiasts as legal, financial and telecommunications executives refuse to travel without it. BlackBerrys (and new color-screen versions dubbed BlueBerrys) are ubiquitous at high-tech conferences. They are a common ornament on the leadership of the Cellular Telecommunications & Internet Association, the wireless industry’s trade organization. Even the federal government has admitted its addiction, with members of Congress using BlackBerrys to stay in touch during the terrorist attacks of Sept. 11.
Dozens of companies compete in the struggling wireless enterprise market. Business spending remains sluggish. Profit margins are slim. But the key to sales, Lazaridis said, is as simple as getting a BlackBerry in a customer’s hand.
RIM’s successes over the past few months make Lazaridis’ assessment hard to dismiss. The company in December reported a record quarter with revenues topping $150 million, net income of more than $16 million and an upgraded outlook for the year. And Wall Street roared. Following the release of its quarterly report, the price of RIM’s stock almost doubled. News of the jump made national business headlines. RIM’s stock now looks like it could soon break the $100-per-share barrier.
Such furious trading spurred RIM to file for a stock offering, and then to increase the number of shares offered. The offering closed about two weeks ago and netted RIM close to $1 billion. Sales are swelling, RIM’s executives promise, come along for the ride.
“BlackBerry has finally caught on worldwide,” Lazaridis said.
RIM, according to investment banking firm ThinkEquity Partners, has officially reached the nirvana of the business world: the inflexion point.
“Despite entering competition, RIM is extending its lead in corporate and consumer data and voice, and we believe the company has hit an inflexion point that should carry it through the next several quarters,” ThinkEquity wrote in a research note following RIM’s fourth-quarter results. “BlackBerry devices are clearly getting adopted worldwide evidenced by the strong unit shipments and subscriber growth. With significant backlog in place, RIM is well positioned to outperform in the near future.”
“It looks to me like they’ve entered a whole new phase,” said Tom Sepensiz, ThinkEquity’s senior research analyst for wireless communications. ThinkEquity said it usually makes a market in RIM securities.
“I think people are finally believing our story,” Lazaridis said.
It’s quite a story for a company that celebrated its 20th anniversary in March. Indeed, RIM’s successes almost defy reason as the rest of the wireless enterprise market works to pull itself out of what one industry watcher termed a “nuclear winter.”
At the end of the 1990s, during the crest of the wireless industry’s heyday, most industry analysts predicted the enterprise would drive the wireless data market. Executives would be powerless against the potential of wireless access to corporate e-mail, calendar, contacts and industry-specific applications-or so the theory went.
However, the reality of the economic downturn combined with the drab and sluggish world of WAP quickly conspired to irritate all but the hardiest information-technology managers. And then came the BlackBerry.
In 1999, RIM introduced its first BlackBerry gadget, which featured a tiny keyboard, black-and-white screen and 20 kilobyte-per-second access to corporate e-mail. Although there was nothing flashy about the initial lineup of BlackBerrys-no color screens, no voice functions, no speedy network access-the simplicity and elegance of RIM’s offering quickly endeared the company to its first few customers.
The basic idea behind RIM’s initial offering differed from that of most of its better-known competitors. Instead of presentations rife with diagrams and promises of wireless access to any application through any device, RIM offered one simple gadget and service. Users could install a server behind their corporation’s firewall and get their corporate e-mail sent straight to their BlackBerry. Instead of clicking through dozens of potentially unsecure WAP pages, users instead could trust that their BlackBerry would collect their e-mails and show them when needed.
“We try to make it as simple as we can to our customer base,” Lazaridis said.
But that was just the start. The advent of GPRS and CDMA 1xRTT networks sparked a new market for BlackBerrys, devices that initially worked only on slower-speed, data-only wireless networks. As black-and-white BlackBerrys began to catch on, RIM started working to partner with the world’s major wireless network operators to sell more advanced devices. It was a difficult task.
“It was around the clock, late nights, weekends,” Lazaridis explained. “It was madness.”
But the work paid off. RIM soon managed to sign dozens of agreements with carriers in countries across the world. To users, the deals meant RIM would be able to add the greatest of all applications: voice. To carriers, the deals meant they could add an enterprise element to their mostly consumer-focused sales. And to RIM, the deals added service revenues, perhaps the company’s most important business.
Each of RIM’s carrier deals-today the company counts more than 50-involves a revenue-sharing agreement. Users pay around $40 per month for access to their e-mail and data applications, and their network operators share a percentage of those data revenues with RIM. Lazaridis declined to discuss details of the revenue-sharing agreements, although those in the industry estimate the company scores between 20 and 40 percent of carriers’ data earnings. Revenue sharing is a scenario first pioneered by NTT DoCoMo Inc. in its wildly popular i-mode wireless data service, and it’s one that most carriers around the world have embraced to some extent.
Around 30 percent of RIM’s revenues today come from data services, while sales of BlackBerrys account for around 60 percent. However, ThinkEquity’s Sepensiz said most of RIM’s revenues in the coming years will come from its revenue-sharing agreements.
Indeed, RIM’s situation is such that some in the industry expect the company eventually will quit its device business, relying instead on its BlackBerry Connect licensees to spread the BlackBerry seed. Nokia Corp., Sony Ericsson Mobile Communications L.P., High-Tech Computer Corp. and-just last week-Samsung Electronics Co. Ltd. have signed up to install RIM’s BlackBerry technology in their own devices. With such high-powered friends helping to sell BlackBerry-capable gadgets, RIM could drop out of the device game altogether. It’s a move pioneered by personal digital assistant maker Palm Inc., which last year split its device and platform businesses into two separate companies.
“We’re keeping our options open,” Lazaridis said. “Until someone begins making serviceable products like ours, we’ll continue making BlackBerrys.”
And RIM has plenty in store for BlackBerry enthusiasts. The company recently released a BlackBerry with a built-in speakerphone through Nextel Communications Inc., and Lazaridis said the company has plans for more speakerphone devices. Other technologies RIM is investigating include integrated Wi-Fi, Bluetooth and higher-resolution color screens. Lazaridis also said RIM is planning to release a new device for Mobitex networks. RIM’s initial line of BlackBerrys ran over the slower-speed, data-only network technology, and the new device serves to quell concerns that RIM would discontinue its Mobit
ex business.
“It’s one of the few networks that’s survived every major disaster in North America,” Lazaridis said, citing the terrorist attacks of Sept. 11 and last year’s East Coast power outage.
And though the wireless industry is buzzing with the potential of camera phones, Lazaridis said that’s one technology RIM has no plans to use.
“Putting a camera in our devices now is more of a liability than a feature,” he said. “We purposely decided not to (install integrated digital cameras). Based on our customer feedback, cameras were a security risk.”
As RIM enters the new year with a white-hot stock and an extra $1 billion to play with, Lazaridis said the company plans to continue to maintain and grow its business. He promised the company’s licensees would introduce additional BlackBerry-capable devices, RIM’s carrier partners would expand their sales and RIM’s 865,000-strong customer base would continue to grow. Although RIM’s legal battle with NTP Inc. continues to plague the company, analyst firms maintain a positive attitude. And Lazaridis said RIM would “keep its eyes open” to possible acquisitions.
“I think what you’re seeing right now is good execution,” he said. “We’ll hopefully do more of what we’ve been doing.”
Which, of course, is getting people to try the BlackBerry.
