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Tuesday
Sep 11

Fool on Call: How Apple iPhone Helps BlackBerry

With the blockbuster launch of Apple 's (Nasdaq: AAPL) iPhone, you would think Research In Motion 's (Nasdaq: RIMM) management team would be pronouncing the end of the world as they know it.

"Human sacrifice! Dogs and cats living together! Mass hysteria!"

But the gang at RIM didn't come anywhere near the level of concern expressed by Dr. Venkman (Bill Murray) in Ghostbusters in the company's latest quarterly earnings conference call. Let's take a look at why.

In the spirit of "coopetition"


Former Canon (NYSE: CAJ) CEO Ryuzaburo Kaku, explained in a Harvard Book Review article titled "The Path of Kyosei," how the folks at Canon approached Hewlett-Packard (NYSE: HPQ) to share Canon's inkjet printer advancements so that both could win. Sleeping with the enemy, if you will, actually happens all the time in business. A more recent example comes from Netflix and how it viewed Blockbuster 's entry into the mail-delivery model as a win-win for both companies.

There has been a term coined for this kind of cooperation between two fiercely competitive companies: "coopetition." Adam Brandenburger and Barry Nalebuff in a 1995 Harvard Business Review article "The Right Game: Use Game Theory to Shape Strategy," explain the term as "looking for win-win as well as win-lose opportunities." The people at RIM currently see Apple's iPhone as a win-win for both companies.

The second question asked during RIM's latest earnings call was the big question: The analyst wanted to know how the management at BlackBerry's company viewed the potential impact of Apple's iPhone and its relationship with AT&T 's (NYSE: T) Cingular Wireless.

This was RIM CEO Jim Balsille's response:

"I think they [Apple] did us a great favor because they drove attention to the converged appliance base [smartphones, PDAs, etc.], and particularly that you should expect media as a soft wrap on your converged smartphone, which we built clear market leadership in. ... We think the attention to it [iPhone] is, and its impact on the dynamic has, quite frankly, been overwhelmingly positive to our business."

That all sounds nice and chummy, doesn't it? Well, there is good reason for management's optimism, and it has just a little more to do than the positive attention coming to BlackBerry via the iPhone. The folks at RIM feel somewhat comfortable right now because the iPhone is a very limited launch at this point. Again, Balsille explains:

"iPhone is launching, to the best of my knowledge, in one carrier and one country. And we're in about 100 countries and 300 carriers, so to the extent there is interest there, there are another 99 countries that are interested in these kinds of things."

We learned in the call that BlackBerry also is now being offered to corporate customers in key Chinese cities like Beijing, Shanghai, and Guangzhou. Additionally, several carriers in Latin America are now offering the Pearl in all three color variations. And the Pearl has seen "excellent" growth in India. Finally, the list of international carriers continues to grow by the quarter. The latest additions include Maroc Telecom in Morocco, Globul in Bulgaria, Millicom in Latin America, and Handcell in Uruguay.

I get Balsille's point, but I am not sure I am totally convinced that this will end up being a win-win for both companies. It is true that the iPhone is attracting an enormous amount of attention, as far as I can see however, that attention is being directed at the iPhone only. Like Apple's latest move to bring the iMac to Best Buy and the threat this agreement presents to Hewlett-Packard and other computer manufacturers, at best I see Apple's entry into the world of mobile communication as a wakeup call to RIM, Motorola (NYSE: MOT), Palm (Nasdaq: PALM), and others.

My colleague Tim Beyers sees the iPhone as a serious threat to BlackBerry, and I agree completely. The biggest positive I can muster up for RIM and others given the success of the iPhone launch is exactly what Balsille noted, the iPhone is currently a very limited launch. As far I see it, RIM has about two years to get on the ball with an equally attractive multifunction device. That's when Apple can begin working with other carriers and other markets. And if it doesn't, this win-win, as Balsille sees it, could very easily turn into a win-lose, with the BlackBerry getting the boot.

Early innings of a big game
When talking about how BlackBerrys are being used by grain farmers in Latin America and the potential there to further develop the business-to-consumer and business-to-business markets, Balsille said, "We're in the early innings of a big game."

Apple just stepped up to the plate and hit a homerun to kick off its entry into mobile communication. Fortunately for RIM, it currently enjoys a sizable lead over its newest threat. Can RIM hold off the furious comeback that Apple and iPhone are sure to mount? Stay dialed in to find out.

wiseowltx's picture
Blackberry vs. iphone

The enterprise users will have great difficulty in adopting iphone, as it is an entertainment device with music, phone and photos as intergral part.

Blackberry transmits e-mail as its primary strength with capability to provide security based transmssions that can not be hacked and is being used with encryption layered transmissions controlled by the user likw US Army, Defense department....

Those enterprise users can spend a lot of dollars as compared with young users...Both address different markets at this time...

Congruence will be easier for Blackberry as the iphone capabilities are not that difficult to develop. The customer inerface is better for iphone and that is Apple's Strength. And, they did it better than Blackberyy fair and square.

But, Blackberry is still very functional and we have a lot of CRACKBERRY ADDICTS to prove this. It will be there 5 years from now.

Market is big enough. IPOD have enough snob appeal that baby boomers will purchase it for teenangers and young adults. As they start working, these young adults will get Blackberry's from their employers. No music or photos for work place.

Think about it....iphone for teenagers and Blackberry's for adults... Teenaers get it form their babyboomer parents and Blackberries from employers...

Wiseowltx

lrd's picture
Apple vs. RIM/iPhone vs. Blackberry

Just wanted to add one more thing. I read somewhere that RIM engineers are hard at work making something that would equal or better the iPhone. But the author failed to point out though is that Apple's got 200 patents approved or in for approval for the iPhone. Any company wanting to make a similar product has to spend a considerable amount of time side stepping these patents and thus making the outcome of an inferior product more probable. And in doing so, RIM like Samsung and others will offer an array of splintered products and thus confusing to end-users.

Apple on the other hand already has a platform 100 MM or more users are familar with- iTunes.

Terrin's picture
No Comeback needed.

In sports, in order for a team to mount a comeback, it first has to have failed to stop another team's offense. However, as far as Apple is concerned, it is a new team in an old league, where it is a new season and the game for it has just begun. Accordingly, Apple is not mounting a comeback.

Scarlet Squirrel's picture
Great article. And it got

Great article. And it got me thinking. It truly amazes me how so many well-paid and supposedly smart CEO's today can be so blind to the true threat that Apple represents to their companies, and won't take the necessary steps to fully protect themselves until it is too late and history has repeated itself and Apple has come to dominate yet another global market ripe for the taking.

I'm no CEO, yet it's childishly easy for me to see and to realize this. I can only wonder why don't they. It truly pains me and grates into me every time I hear some CEO proclaim that Apple is not really a threat because of the high prices they charge, that Apple is no threat because iPhone doesn't have certain capabilities that business users need, that Apple is no threat because the iPhone lacks this feature or that feature.

So what? Is that a reason for you to rest on your laurels and not be scrambling to create better products or be worried? Any phone manuf CEO who feel it's still business as usual in light of the threat imposed by iPhone, then fools they are. I totally agree with the principal that only the paranoid survives. It's better to be a little paranoid and to survive, than to behave like you're so cool and calm and get steamrollered over.

The fact is, all of iPhone's current shortcomings can and will be addressed and sooner than you think. It's only just a matter of time. Apple's first release of iPhone is just that - only the first, but not the last. This first version is only to establish a beachhead, nothing more. You can be absolutuely sure there will be many more versions of to come, versions which will target every revelant market, even the so-called business market, which companies like RIM seem to cherish and depend on so much. The fact that Apple is not currently targeting your specific market is by no means indicative that Apple won't target your market in the future. The only thing it is saying is that you have some lead time.

Maybe a year or two at most, no more. So now is the time to prepare yourselves. Now is the time to be scrambling to create some truly innovative and compelling devices to be able to compete against the coming onslaught of innovative iPhones which will surely come and will target your specific market, whatever your market is. That's why every cell-phone manufacturer on the planet - regardless the market - should indeed be worried and quaking in your boots.

Why? Because if your market is indeed relevant, then you can surely bet Apple is coming. It is only just a matter of time. And if for some reason Apple does not come, then it is only because perhaps your market is not relevant to begin with. And perhaps neither are you. Therefore, if you feel you are relevent, then you must Prepare Yourselves or become extinct. Don't be like so many proud MP3 player manufacturers before you who didn't realize or accept the fact that Apple was a threat until they found themselves steamrollered over.

Now they're history. Now they're irrelevant in a relevant society. You have to be the one who truly thinks smarter. Why? Because Steve Jobs certainly is. And he is already several steps ahead of you.

lrd's picture
Apple & RIM: Be concerned, very concerned!

Just think- in one swing Apple's iPhone made the Blackberry look like a 1950 Ford! Wait and see the slew of apps and enhancements by Apple in the weeks and months and RIM has a lot to be concerned about. For one the iPhone will severely limit RIM's ongoing expansion beyound the enterprise market. For two, just like the iPOD, newer and cheaper version with more capabilties are on the horizon. And 3rd, just look at the commercials. People are now going to compare their Blackberry's to the iPhone and say: Can a Blackberry do that and do it this way?? Ans. Nope. And fourth with the iPhone you could port all your e-mail from the most popular services again limiting RIM's growth. And fifth, and this is a big one, iPhones allow to tap the endless resources of iTunes! I mean music, books on audio, podcast, v-cast, movies, Tv shows, etc.., get the point?

If I were RIM I'd be very concern.

Brian's picture
What did you expect them to say?

They are surely scared by the iPhone. But only an idiot would admit it in their position!

tom b's picture
RIM

Yea, Blackberry has a few years to live, still. I'd short the also-rans, though-- Palm, Windows Mobile, etc.

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