RIM news fuels speculation that BlackBerry will push advertising

Research in Motion Ltd.’s recent news blitz has left technology and financial analysts smiling, with predictions that the company will maintain its grip on the enterprise market while still being able to leverage its new platform in the consumer space, and perhaps even push advertising. “They have the first, third, and fourth-best selling smartphones in the US,” Douglas Ireland, an equity research associate with JMP Securities, tells Report on Wireless. Ireland is referring to the fact that, according to research firm NPD Group Inc., the top-four bestselling smartphones in North America are the BlackBerry Curve 8300, the Apple iPhone 3G, the BlackBerry Storm, and the BlackBerry Pearl. “RIM’s gross margins are rising, and as volumes increase their cost per unit will decrease,” says Ireland. Ireland notes that RIM is now beginning to benefit from previous R&D platform investments, as well as resources put into sales and marketing. Overall, financial analysts left the company’s analyst day on May 5 feeling upbeat, though they had yet to fully digest a wave of news that included the launch of BlackBerry Enterprise Server 5.0, the BlackBerry MVS Server for Cisco Systems’ Unified Communications Manager, the extension of push technology to BlackBerry developers, and a deal with Hewlett-Packard (HP) for mobile printing services. “Enterprise Server 5 is the big news,” says Mark Tauschek, lead analyst at Info-Tech Research Group. “The built-in availability, built-in failover – you used to have to go to third parties for that sort of thing, and a solution might have cost $20,000 or more. Now it is baked right into Enterprise Server 5.” The new features include BlackBerry Administration Service for web-based management, role-based access controls that allow IT administrators to delegate tasks to IT staff, and enhanced over-the-air application deployment and management features. These include the ability to push mandatory applications and to identify disallowed applications. “It’s a big release to move to 5.0” says Tauschek. “There is a lot of stuff here – the over-the-air provisioning, push applications, and management features – and it is much improved.” For Tauschek the other news from Cisco and HP pales in comparison. “The Cisco functionality has been on the IP-PBX for a while,” he says. “As for HP, cloud-based printing is a good idea. It’s a cool to be able to print from any BlackBerry at a Kinko’s, Staples, or a gas station – but it will be a while before we get there.” It is the extension of push technology to BlackBerry developers that is of specific interest to Tauschek. “They will now have the ability to develop applications that will push advertising. I am sure that is how this will be used,” says Tauschek. “They will use it to do things like push out sports scores...But one of the primary uses for that functionality will be advertising.” Tauschek says that RIM will follow Apple Corp.’s App Store model, although with more restrictions. “The applications will be vetted in the same way,” says Tauschek. “But it will probably be much more stringent. It will certainly be more stringent that Android Market will be. Enterprise Server 5 can help here, too.” Ireland says that opening up the BlackBerry to third party developers doesn’t make any sense from a direct revenue perspective, but is instead all about building capabilities, market share, and brand. “A new group of developers will make the devices more attractive and stickier,” he says, adding that this strategy should prove successful, keeping customers on Enterprise Server loyal. “BlackBerry owns the enterprise in a very real way,” says Ireland. “It is seen as more secure and more rugged. Once integrated with Enterprise Server, customers are much less likely to change phones.” Ireland notes that competition is heating up in the smartphone market: HTC Corp. and Motorola Inc. will be coming out with phones that use Google’s Android OS; Palm Inc. has the Pre coming soon; and the iPhone will be out this summer with its 3.0 firmware update. Nokia, dominant in Europe, is still a wild card in North America. Tauschek agrees, and says that the application area is one place where RIM has to play catch-up. “Apple proved that it is all about apps,” he says. “ Balsillie thinks that rich media and video will be a big factor in the coming years, but we are still in the hype phase.” Meanwhile, RIM’s sales took off in the first quarter of 2009, according to NPD, which claimed that the BlackBerry hit 50% of the US smartphone market, ahead of the iPhone, and that both Apple and Palm were down about 10% each.

RIM news fuels speculation that BlackBerry will push advertising

News | May 13, 2009

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