The latest scuttlebutt surrounding Steve Jobs’ much-anticipated jump into wireless sounds more like a breakfast treat than a music-friendly phone-but it could produce a tasty mobile device.
Tech bloggers and industry analysts are abuzz over the thought of an “AppleBerry,” the imaginary fruit of a potential collaboration between Apple Computers Inc. and Research In Motion Ltd. Peter Misek of Canaccord Adams breathed life into the supposed handset in a recent research note, saying that an Apple/RIM team would have huge merit.
“We believe Apple’s design team is phenomenal and their content platform is incredibly compelling both from ease-of-use and a sheer catalog size,” Misek wrote. “However, Apple is missing two very important things-wireless capabilities and carrier partnerships. Enter RIM.”
RIM, it should be noted, currently is or recently has been a client of Canaccord or its affiliates.
Misek was careful to address only the potential upside for such a partnership, saying that determining whether the companies really are working together is “extremely challenging.” But the document was breathlessly received on the Internet, serving to stoke yet another round of predictions regarding Jobs’ intentions in wireless.
The Canaccord senior analyst has an impressive track record, drawing attention last year for correctly forecasting RIM’s move to Intel Corp.’s processor. The chipmaker’s executives have urged Apple-which uses Intel’s chips in its computers-to partner with RIM, according to Misek.
Both firms declined to discuss the rumors, but, on the surface, collaboration between the dominant wireless e-mail player and the leader in mobile music makes sense. RIM has announced plans to launch a multimedia device later this year, and no player can match Apple’s knack for building portable entertainment devices.
“I think it’s certainly something that has potential,” David Linsalata, a research analyst with IDC’s Mobile Markets program, said of the possible collaboration. Any partnership “essentially has to be something that would play to the strengths of both companies, and their weaknesses as well.”
Indeed, RIM could provide a rare opportunity for Apple to come to market in a big way without having to team with a carrier. Apple has long eyed the mobile market: The company teamed with Motorola Inc. last year on the Rokr, an iTunes-capable phone sold by Cingular Wireless L.L.C. that received tepid reviews. And the company has applied for patents covering a system for wireless data transmissions to handsets as well as a “dual download” service that allows users to buy content from a handset and download to a PC.
Another recently published patent application describes a device with a wireless browser “interacting with the online media store via a low-bandwidth network.” Also, Apple has gained the rights to the Internet address iPhone.org, which directs users to the company’s home page.
The computer maker flawlessly executed iTunes, suffering razor-thin margins from its digital music service to focus on building the lucrative iPod hardware line. However, some analysts believe the window for stand-alone, portable digital music players is closing as the wireless industry slowly works toward bringing a compelling, music-friendly phone to market.
There’s little doubt that Apple plans to jump head-first into wireless at some point. Many onlookers believe the company plans to have Apple-branded devices on the market by year’s end, and some analysts say an MVNO is in the offing.
Misek painted three possible devices that could stem from collaboration between the two companies: RIM could introduce iTunes capability into its new multimedia BlackBerry; Apple could offer an iPhone with BlackBerry and Intel components; or the companies could build an entirely new handset.
Regardless of the form, though, RIM’s expertise could help Apple overcome hurdles that thus far have proven insurmountable in bringing a music-friendly mobile phone to market, Misek noted.
“It appears through our checks that the fallout of the Apple and Motorola relationship has been material,” according to the analyst. “We also believe that Apple attempted to build its iPhone with the help of several ODMs (original design manufacturers) who signed very tight and specific NDAs (nondisclosure agreements). We believe that performance, battery life and aesthetics proved very disappointing.”
But while Misek’s paper drew much attention from tech-savvy iTunes fans and wireless industry enthusiasts, analysts greeted the rumors skeptically. RIM owns the market for high-powered executives who must stay in touch on the go, and Apple is the brand of choice for young adults and teens who want to take their music everywhere. It’s unclear though how many users want both those qualities-particularly in the early days of converged devices.
Several analysts pointed to the maverick business styles of both RIM and Apple, questioning their willingness to cooperate. It seems unlikely-and possibly unwise-for one player to contribute to building a device that ultimately features the other company’s brand more prominently.
“I think the key for Apple, regardless of how they go (into wireless), is that they need to maintain control,” said IDC’s Linsalata. “That’s what’s great about the iPod. If they can’t do that same thing in the wireless space, they risk losing that (brand recognition) they’ve built up.”
It’s clear the wireless industry could use Apple’s talents for building eye-catching devices with simple user interfaces. While both Sprint Nextel Corp. and Verizon Wireless have deployed full-track download services in an effort to cash in on digital music sales, the U.S. market has yet to see a music-friendly phone that is easy to navigate and can store more than a few hundred songs.
But wireless devices depend on wireless networks, of course, and Apple must aggressively pursue at least one partner in order to gain entry to the market. Interestingly, the company’s unwillingness to partner with operators mirrors the behavior of RIM in its early days, Misek noted.
“We believe that the major stumbling block to this relationship is the relatively unconstructive attitude Apple has displayed toward the carriers. In fact, it reminds us of RIM many years ago when they almost wanted to compete with the carriers and then very intelligently realized that partnering was the appropriate route,” Misek wrote. “Under the old adage that the enemy of my enemy is my friend, we believe that an Apple and RIM partnership could indeed be a serious blow to Microsoft.”
