Apple and RIM Battle for the Corporate Mobile Market

Cell phones are getting more and more sophisticated and along with the changing technologies, mobile usage patterns are starting to shift. According to a just released report from Pew Internet, about 75% of American adults own a cell phone. 58% have used their device for non-voice applications (email, texting, and Internet) and 41% have logged into a mobile Internet connection.

Apple (AAPL) and Research in Motion (RIMM) are among the phone makers leading the push to the future, but like giant ships passing in the night, they have so far approached the markets from opposite shores; one focused on consumers, the other the needs of corporate business users. Now that is changing.

In an increasingly spirited competition, both companies are expanding their ambitions. Instead of targeting just a segment (corporate/consumer), they’re now both aiming for the entire smart phone market. It’s shaping up to be an interesting battle.

In the fall, RIM fired the first shot across Apple’s bow with a deal to incorporate Facebook-related functionality into their platform. Wednesday, RIM again took the headlines with the announcement of a mobile music partnership with social networking site Dip Dive. Promoting the deal, RIM’s CEO James Balsillie made it a point to emphasize the platform’s features, saying, "The multimedia capability of the BlackBerry is growing, and the adoption is growing very, very fast." He also said “the two hottest trends in wireless are social networking …[and] multimedia, which is principally portable music."

Thursday was Apple’s day. At a press conference Thursday morning, Apple revealed what had largely been anticipated: iPhone support for enterprise email services and a broad software development plan for the iPhone. Now, like RIM’s Blackberry, the iPhone will receive pushed (e.g. auto updated) email and calendaring data from corporate servers running Microsoft (MSFT) Exchange. These are just the kind of corporate services that had previously differentiated the companies’ two competing platforms.

Apple’s new service, which works with Microsoft’s Exchange ActiveSync mail software, will almost immediately synchronize emails. Mix that with Apple’s visual voicemail, impressive internet applications and wow factor (even absent the tactile comfort of a traditional rather than virtual keypad) and the iPhone is a now a corporate device.

Addressing other business oriented concerns, the new software will also allow business users to toggle contacts, email and calendaring functions on and off at their discretion. From a security standpoint, the software updates, according to Apple’s Philip Schiller, address corporate issues as well. Now, corporate IT departments will be able to remotely wipe the phone in case it is lost. There won’t be need to fear misplaced corporate data.

Looking to the future, things are sure to get even more interesting as competition between the two companies accelerates. Already, Apple has pledged to sell 10 million iPhones this year. They also claim nearly 70% of mobile Internet traffic is flowing through the iPhone. RIM fires back with their own optimistic projections. Their data points out nearly two-thirds of their 12 million BlackBerry subscribers (as of December) are classified as government or corporate customers. That’s a significant advantage in the enterprise market. This is a battle that could get nasty (and it’s already heated. Overall, Apple has taken approximately 28 percent of the U.S. Smart Phone market in less than one year. RIM’s Blackberry has 41%. (Palm (PALM) has about 9% (via Canalys)).

iPhone SDK
In other related news, Apple used the Thursday morning show to introduce the much anticipated software development kit for the iPhone. The new package will give developers access to much of the iPhone’s underlying hardware configuration including the accelerometer sensor that gauges motion. It will also provide them with sophisticated testing, debugging and simulation tools. The breadth of this access is intended to encourage the creation of a wide swath of application territory; programs from games to work related utilities.

To showcase the ease of using these tools, Apple previously gave third party developers two weeks to see what they could create. Apple’s pitch: development is easy and you’ll prove it. Examples of these two week coding adventures were revealed at the press event. One example was a motion controlled game called Touch Fighter. Built around flying a Star Wars X Fighter spaceship, a player controls the vehicle by tilting the iPhone similar to the way they might use a Nintendo (NTDOY.PK) Wii controller. Another gaming example was a mobile version of EA’s (ERTS) upcoming Spore game title. A photo manipulation program called Touch FX showcased a different set of functionality. Using simple touch/gesture controls it turned the iPhone into what amounted to a sophisticated etch-a-sketch. Track a finger across the screen one way and you will morph the picture like a carnival’s house of mirrors. Don’t like it? With a shake of the phone, the picture returns to normal.

Applications built with the new SDK tools are expected to be approved and released by June.

Comments

[jmmx]

From CNBC:

us.rd.yahoo.com/financ...

"I said it yesterday, exclaims Jeff Macke, the iPhone is not a corporate device. It’s too difficult to use."

WOW - what planet is HE on???

[jmmx]

Sorry - link is:

www.cnbc.com/id/235027...

[JIM]

Macke said one night on the show I no longer watch, "Hope it kills the iPhone, hate it", speaking of RIMM. Said it with hate and conviction as well.

What a hoot. He truly is a Porky Pig and Elmer FUD hybrid!

[meh]

let's get it straight there is no battle, rim is ahead , apple is just trying to make a lot of noise that's all their good at and it's an ugly way to do it, you introduce a new product competition is good but you dont step on someones toes. i feel alot of hot air ... look at the product from security issues, to having to send batteries back, overpriced junk with bad reception in a economy going downhill.. when you do business like apple you deserve your stock to drop 50% on top of that you got all these angry zealots threatning analysts it's outrageous, if the stock dropped to 5.00 i wouldnt feel least bit bad it deserves it.. by the time the iphone reaches blackberry level,, there will be something much better out there

[Peter Lynch]

I am surprised that this article made it to the front page of SA. It has very little original thinking or analysis.

A couple of comments/feedback:

1. RIMM has been targeting the consumer market for a while, even before the iphone was launched. Ever heard of the Pearl?
2. No mentioned of Nokia at all in this article. Nokia may not be as well known as Apple and RIMM in the U.S., but it is actually the number 1 smartphone maker in the world. Last time I checked, Nokia was still kicking iPhone's behind in Europe. And let's not forget that there are a lot more cellphones and smartphones outside of the U.S. than in the U.S..

If history is of any indication, the smartphone era is just getting started, and the early leaders may not always be the eventual winners.

[peter02l]

Lynch,

Which history are you referring to?

The way I see it, up to this point you may have had a point about RIM expanding into the consumer market with Pearl, since they were pretty safe with their 2/3 of the business they do with corporations. But yesterday's announcement means RIM's corporate market in now under threat by a fantastic, highly desired phone that both management and sales were trying to bring in in spite of IT opposition.
This was a brilliant move on Apple's part.

[Peter Lynch]

peter021,

I was referring to the computing history, basically mainframe, PC, and PDA.

Incorporating microsoft exchange activesync into a mobile device is not a technological breakthrough.....it has been done before, i.e. palm Treo has had this function for more than a year now, I think. iPhone may be desirable to teenagers but certainly not to CIOs. Why would a company spends extra $$$ for video and music capability when all it really needs is push email. Plus, the iphone is not a very durable phone for road warriors....the repair rate on iphone is actually quite high.

iphone, in its current form, will never be a serious business device, not to mention that apple has very little experience selling/supporting enterprise customers.

Of course, if your company is not an ATT customer, then iphone really doesn't matter.

[ProudCanadian]

Here in Canada, more than one Canadian are offended by Job's comments about the security in Canada.

[yc]

Why pay extra for audio and video when all you need is push email?

Several reasons:

1. Push email on the iPhone is very rich with integrated audio and video built right in.

2. Audio/Video is very good for business presentations and education.

3. Internet access on the iPhone is simply amazing. Opera is trying to get there but no one else has it at this time.

5. Podcasts are awsome for business broadcasts to employees in very large corporations.

6. Google Map is excellent when travelling on business.

7. The Apple User interface simply blows everything else away for ease of use.

The list can go on and on with third party aplications. The bottom line is that the richer the portable device the better.

[top_tier]

The competition argument is moot in many ways. Those in business simply needing a phone with good email capability will continue to use RIM phones, but that's where the so called competition will end and where the iPhone begins.

Apple's OS for the iPhone is a version of their desktop OS, this is an incredibly powerful OS that's seen decades of development as an evolution process for Mac OS. RIM's OS doesn't come close to the depth and power of Leopard OS, sorry RIM fans, it's like comparing a Ferrari to a Mustang. The extensible nature of the iPhone's OS has been barely scratched the surface of in capability, but why it's grabbed as much market share in the smart phone market in less than a year. It's not fashion, although the iPhone has that too, and no doubt contributed to the initial uptake.

The idea that Apple "was" focused on consumers and RIM "business" is funny in many ways when considering Apples iPhone has been on the market less than a year.

This competition will be short lived when the iPhone hits second gear and the new applications start pouring out from global buckets of developers, in tandem with a 3G iPhone. In the U.S. Verizon will keep RIM in the game being that CDMA plays an important competitive roll here. Look out globally though where GSM is the standard bearer and as Apple continues to bring on new carriers there.

[win]

Top_tier - nice comment.

Peter Lynch - Nokia is up there in Europe, but Asia will be a big Apple market. Go to China or India. The I Phone is a status symbol - it's the Ferrari of phones.

[studentx]

People who keep making comments about how expensive the iPhone is are clueless. If you're comparing smart-phones, the iPhone cost the same or less with a contract with a data plan. Yes, you pay more upfront but the data plan cost less because you're not paying back a false subsidy. Carrier subsidies are nothing more than a math trick - there is NO discount.

This is an article that compares smart-phones the pricing with a data plan. The pricing is old but it still applies today, if you compare current plans.
www.roughlydrafted.com.../

PS - If you're comparing the iPhone to a vanilla cell-phone with a keyboard, then you're just being an idiot.

[seriously ?]

"This is a battle that could get nasty (and it’s already heated. Overall, Apple has taken approximately 28 percent of the U.S. Smart Phone market in less than one year. RIM’s Blackberry has 41%. (Palm (PALM) has about 9% (via Canalys)). "

Wrong. With the SDK, Apple will soon own this market sans MS/(hugecap/conglomera... buyout.

Here's a concrete prediction:
Either Apple is the clear market share gorilla in 2 years time or we will have begun speculating as to how much RIMM/PALM will cost.

[seriously ?]

"The bottom line is that the richer the portable device the better."

Exactly. I mean what's stopping apple from putting an iSight camera on this thing in 2 years time ? This is just one 2-sec example. The iPhone is clearly the "richest" AND easiest to develop for.

[VSD]

iphone's lack of hard keyboard is a problem that it needs to overcome for enterprise. You can type an email lot faster on BB than iPHone. iPhone is great for browsing and executing corporate processes that have migrated to the web.

[CSR]

iPhone not a corporate device? Let's see, in our company, several of the reps, myself included, have been pushing for adoption of the iphone for several reasons all having to do with corporate interests.

1. The iphone is far easier to use with much more functionality than the Blackberry. Our Blackberry's have extremely poor reception. I currently give all my customers my iPhone number so as to not miss messages. Add in the ability to receive and view Word and Excel spreadsheets (Quotes) and forward them on to customers and the Blackberry starts to look pathetic / useless by comparison. (With Powerpoint access on the way the Blackberry looks even worse)

2. Visual voicemail: Anyone who has used it knows this was meant for business from the very beginning. Lets see, I have 10 voicemail messages. On the Blackberry I have to listen to them one at a time not knowing who they are from. iPhone: gee the customer on the 2 million dollar deal just called back, I think I'll answer this one first. Again, the Blackberry pales by comparison.

3. Google maps and virtual GPS combined with turn by turn instruction gets me to appointments on time stress free. I guess the blackberry users could just go out and buy a new car with GPS or buy a stand alone GPS unit. That seems like a real economical solution, ... not! Again, Apple wins with greater functionality that sales reps care about for less money than a Blackberry + all the other devices needed to match Apple's functionality.

4. Future software applications including Salesforce.com. I guess it is a little unfair to compare the iPhone's ability to run complex software applications that require the web and sophisticated graphical user interface, but then again this is why it's not really going to be a fair fight. Apple literally blows the competition away here. Game over. Apple wins.

[KPO'M]

CSR, many BlackBerry devices (e.g. 8800, Curve) have full GPS receivers built in, with real-time turn-by-turn directions (not just Google Maps, which is available for free for any phone). Fair point on the other items, but Google Maps really isn't that much of an advantage for Apple. I wouldn't be surprised if Apple adds GPS to a future iPhone, though.

[top_tier]

Most phones will have a GPS chip in them in the future, e911 is the primary driver behind that. About 28% of all phones have it to date. Although a GPS chip obviously allows for a much larger set of GPS capable applications. This will be seen in future iPhones almost certainly.

[JIM]

This Blackberry VS iPhone argument smells a bit like the DOS vs Windows arguments of days gone by.... RIMM will need all the luck it can get with its 52 p/e ratio. It's in Apple's, and, soon, many analyst's crosshairs!

[AndrewHorowitz]

The iphone with 3G and push email wll be a wicked combo. Add a better synch to make it a portable hard drive and ability to connect to external screen.. WOW. Movie device, mini computer, external drive, mail, internet. The next palmtop. (can I ask for gaming?)

Not a fantasy at this point. Apple is sitting in a good position.

[AndrewHorowitz]

...

[digivision]

as much as some corporate folks prefers a plain and well tested device like the blackberry or the PC,
Apple will prove that by winning the consumer's heart you can easily break into the corporate world by improving the iphone one step at the time
as they always did.
Sure not every corporation will jump on the iphone's bandwagon
but the goal i think is to gain IT acceptance and compatibility with their
support tools , so that consumers can take their iPhones to work , this way you don't really give a crap if your company gives you a blackberry
when you can use the iPhone you already own.. by the end of 08 Apple will have sold almost as many blackberries, Rimm took years to sell..
out of 5-7 millions US users, how many do you think will make it into the corporate world??

[rayward]

As CSR pointed out, Salesforce.com is already lined up to be added to the iPhone. And this is just the tip of the iceberg. Corporations will be able to add simple or complex apps to the iPhone which, combined with VPN etc. will make the iPhone an extension of the office like no other device before it. Reporting back, syncing and updating in real-time whilst being permanently remote. The inevitable arrival (perhaps this year) of a 3G wGPS iPhone will make it the must-have solution to business needs.

And don't overlook other uses. Colleges all over the country are already using iPhones as the basis for student communication and interaction. Try podcasting a lecture to your BlackBerry and see how far you get.

Lastly, I don't see any car manufacturers making custom BlackBerry interfaces, but pretty much all of them make one for an iPod. Land Rover even have a concept car that uses an iPhone as key and ignition switch.

In less than 6 months, Apple created a $1billion industry (based on sales revenue plus subscriptions). That's amazing, especially when for 5 of those 6 months the market was limited exclusively to one carrier in the U.S.

Some people will always prefer the BlackBerry in the same way that some people prefer the fixed rear axle on the Mustang. Me? I like to go around corners, with my car thumping to the beat of my iPhone.