RIM looks forward as India, other challenges loom

By Alastair Sharp

TORONTO (BestGrowthStock) – Research In Motion (RIM.TO: ), its global growth and its secure-email niche challenged by both rivals and governments, is preparing for a long fight it may yet lose on a shifting battlefield.

The Canadian company’s BlackBerry smartphone was once a byword for safe corporate communication.

But its North American market share has shrunk as some core clients loosen security specifications to let employees use alternatives like Apple’s (AAPL.O: ) iPhone and devices running Google’s (GOOG.O: ) Android operating system.

And RIM’s new BlackBerry Torch touchscreen phone, a possible rival to the iPhone, has met a muted reception. In a parallel challenge, India and other countries are seeking enhanced access to BlackBerry emails and instant messages.

“Apple and Android have changed the world RIM created,” said Iain Grant, the head of telecom consultancy SeaBoard Group. “But they’re actually expanding the universe more than they are cannibalizing it.”

RIM launched the Torch amid unusual fanfare this month as it sought to reinvigorate its image with consumers amid a shrinking divide between devices for business and pleasure.

But the high-profile launch failed to drum up even a hint of the excitement generated by Apple launches and no one lined up for hours at a flagship store — RIM doesn’t even have one.

The Torch, which combines the familiar RIM keyboard with the sexier touchscreen and an updated operating system, may be a slow-burn device that catches up with competitors rather than overtaking them, but it’s not an Apple-style revolution.

In its efforts to catch up, RIM has purchased an application storefront company called Cellmania to grow its revamped BlackBerry App World, whose 9,000-odd offerings are eclipsed by Apple’s 200,000-plus third-party applications.

Cellmania, bought for an undisclosed price, will give RIM a way to track downloaded content and let users have charges included in regular phone bills. Its clients include AT&T (T.N: ), which has exclusive U.S. rights to the Torch, Australia’s Telstra (TLS.AX: ) and Spain’s Telefonica (TEF.MC: ).

RIM has also claimed the web domain www.blackpad.com, in what industry-watchers speculate is a preparatory move toward launching a tablet computer of the same name this year — perhaps a secure, business-friendly rival to the iPad.


While RIM’s share price has slid to its lowest since March 2009 and analysts fret about its prospects, most still recognize RIM’s advantages as a provider of secure emails.

The shares were at $45.60 on the Nasdaq on Friday morning, down almost 40 percent from peaks above $75 in March. In the same period Apple is up slightly and Google has shed 20 percent.

“I talk to the most risk-averse type of users, like defense contractors, and they would not even consider going outside of RIM,” said Wunderlich Securities analyst Matthew Robison.

But RIM’s security-focused reputation is also crimping its expansion, as governments seek greater access to its messages for fear militants can use BlackBerrys to plan attacks, or users will communicate in ways that breach social norms.

India has threatened to ban BlackBerry services unless RIM grants it access to enterprise email traffic, something RIM says it cannot provide.

In the Middle East, a lack of access also raises fears about spies, assassins or Islamic militants, and talk of future curbs on the BlackBerry service.

Saudi Arabia, fretful its young use the Messenger service to breach conventions discouraging contact between unrelated men and women, has reached a deal with RIM on the service, a consumer product outside of the secure corporate domain.

But a perception of special treatment to any one country, something RIM repeatedly denies, only adds to the pressure.

“They have to create the construct that makes it politically viable for those regulators,” Robison said.

India, with one million of RIM’s 41 million BlackBerrys, is one of the world’s fastest growing mobile markets and its imminent rollout of 3G networks will only increase the appetite for smartphones, analysts say.

As RIM pointed out in a diplomatic statement on Thursday, other devices can send encrypted messages too.

Wunderlich’s Robison said he is watching Intel’s (INTC.O: ) $7.7 billion bid for security software maker McAfee (MFE.N: ), expected to close by December, as the biggest long-term threat to RIM’s secure data dominance.

“I look at that as the industry marshaling against RIM…it does show you the interest in the industry to try to counter what they offer with the BlackBerry network,” he said.

(Editing by Janet Guttsman)

RIM looks forward as India, other challenges loom