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Friday, December 10, 2004

The Squeeze On BlackBerry

Businessweek has published a well written and very informative article on the transition RIM appears to be trying to make from a hardware company with software to a software / services company that also sells some hardware. Sales of all of RIM's handsets, affectionately known as "crackberries" for their addictiveness, are expected almost to triple in this fiscal year. This would drive hardware revenue to 76% of the total in the 2006 fiscal year, up from 58% last year. Excerpts(with edits and my views added):

Mike Lazaridis and James L. Balsillie, the co-CEOs of Research in Motion Ltd.have plenty of reason to feel on top of the world. After 20 years spent in the quiet university town of Waterloo, Ont., developing technology to deliver wireless e-mail, their BlackBerry gizmo is an outright phenom. What the iPod is to mobile music lovers, the BlackBerry is to workers on the go. For the fiscal year ending in February, company sales should more than double, to $1.35 billion, as net profits soar from $52 million to around $300 million and the number of global BlackBerry subscribers leaps from 1 million to 2.5 million. The stock price has quadrupled in the past year, to $84. Amid all the hoopla, the chief executives calmly explain that they never doubted that they were on the right track. "We beavered away for years," says Balsillie. "We never knew when the market was going to pop, but we never worried much that it would eventually happen."

Now companies across the tech industry are marshaling their forces to squash the BlackBerry. The rivals include Nokia , Dell , Hewlett-Packard , palmOne , Good Technology, Seven Networks, a passel of Asian device makers, and, yes, Microsoft. The groundwork for RIM's strategy is coming into place. The company has established ties with more than 70 phone carriers around the world that offer BlackBerry subscriptions to corporate customers and pay BlackBerry between $5 and $10 per subscriber to direct the flow of data between devices and networks. At the same time, RIM has licensed its BlackBerry messaging software to a host of competitors, including PalmSource, Nokia, and Motorola . The company has also worked to widen its scope beyond e-mail, hammering out agreements for mobile data services and news from the likes of Bloomberg Financial Markets, SAP, and PeopleSoft . The first results of RIM's transition will start to be seen over the next few months. Around a dozen handsets using RIM's licensed technology are scheduled to roll out. They include a pricey full-keyboard phone from Nokia, the i500 Palm-powered smartphone from Samsung, and Motorola's MPX Pocket PC with a novel sideways keyboard.

Still, navigating this shift is one tricky job for Blackberry management. They must balance their need to cooperate with key customers of RIM's software and services against their desire to compete with the same companies in e-mail devices. At the same time, there's the risk that as e-mail becomes a standard feature on all sorts of phones, the divisions between RIM and the rest of the mobile-phone world will fade away. Ron Garriques, chief executive of Motorola's cell-phone division, says that phones with keyboards, while a small slice of the market today, are "becoming more interesting over time."Even in an industry where collaboration between competitors is grudgingly accepted, RIM's aggressive pursuit of two distinct businesses may spark dust-ups with competitors. And staying ahead in both hardware and software remains a major challenge. For RIM, it's a risky strategy of brinkmanship. But these Canadians are just as convinced as ever that they're on the right track.
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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"