Research In Motion's 3G Counteroffensive: The Smartphone Arms Race Escalates 32 comments
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Two weeks before the new Apple 3G iPhone was released, a ChangeWave consumer survey showed it was likely to have a tsunami-like impact on the smart phone market. We all know what happened next – an extraordinarily successful 1 million units sold in the first weekend.
But what does that mean for current market share leader Research In Motion [RIM] (RIMM)?
First, our survey showed the 3G iPhone had catapulted Apple (AAPL) into the lead in terms of planned consumer smart phone purchases for the next 90 days. But remember that RIM and its BlackBerry have a gigantic lead in the corporate smart phone market. Plus, RIM (42%; unchanged) is also the leader among current owners in the consumer market.
Yet despite its current lead in both markets, RIM isn't taking the Apple 3G challenge lying down. The Canadian manufacturer has multiple plans in motion to counter Apple's momentum among consumers, including an already announced new product release (the Bold) and two likely additional product releases (the Thunder and Kickstart).
To get a sense of the market potential for RIM's new smart phone arsenal, we surveyed 3,567 consumers on their reaction to the new RIM counteroffensive. The survey was conducted in the aftermath of the Apple 3G announcement (June 17-23), but before the new iPhone model was released.
Preparing For Multiple Battles
Consumer respondents were presented a brief description containing key features of RIM's new smart phone models, along with a follow-up question asking them how likely they were to buy each model if and when it becomes available.
As the following chart shows, the new RIM releases each show considerable potential among consumers once they actually get into the marketplace.
- A total of 4% of respondents report they're Very Likely to buy the new RIM/BlackBerry Bold when it becomes available. Another 13% are Somewhat Likely.
- Slightly less positive but nonetheless significant, 2% of respondents say they're Very Likely to buy a RIM/BlackBerry Thunder when available. A total of 13% are Somewhat Likely.
- Another 2% say they're Very Likely to buy a RIM/BlackBerry Kickstart when it becomes available, and 11% are Somewhat Likely.
The Victors and The Vanquished
Our recent surveys show Apple and RIM on a clear collision course in the consumer smart phone market, as the three new RIM phones get set to counterattack the market assault from the Apple 3G iPhone.
And while the current survey shows the new RIM releases have considerable potential, the real test is how satisfied consumers will be with their new BlackBerries once they hit the market.
We will, of course, closely measure the initial reaction once consumers have their new BlackBerries – and if it turns out that the initial reviews on RIM's new releases aren't great and consumer satisfaction goes down, then RIM will almost certainly receive rough treatment from the Street.
But to date, the strength of our early survey results on the demand for RIM's new products points to a powerful counteroffensive in the making by the Canadian manufacturer.
The real losers here will most likely be the second-tier players, who could find themselves increasingly pushed to the sidelines as the two Goliaths battle for market dominance.
To find out which manufacturers are most at risk because of the RIM counteroffensive, we took a close look at the impact of the new RIM releases on the rest of the industry.
Not surprisingly, current RIM customers are two-to-three times more likely to buy the new RIM models than the customers of other manufacturers. But we found the new releases also have significant potential to lure away customers from other manufacturers – with Palm (PALM), Motorola (MOT) and Samsung coming in as the top victims.
Apple customers, on the other hand, appear least likely to buy any of the new RIM phones.
As the old adage goes, to the victor goes the spoils – and by the looks of things, Apple and RIM are both victors. The Apple iPhone has captured the hearts and minds of its user base, and so has the RIM BlackBerry. Fortunately for both, the global consumer and enterprise smart phone markets are big enough to support both Apple and RIM – it's the other cell phone manufacturers that look like the real losers.
Jim Woods co-wrote this article.
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This article summarizes the results of a recent ChangeWave Alliance survey. The Alliance is a research network of 15,000 business, technology and medical professionals who spend their everyday lives working on the front line of technological change. For more info on ChangeWave, or to sign up for real-time alerts email on the hottest technologies and companies, click here.
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This article has 32 comments:
You would get a very different market share picture and data that is more useful to your readers
It is RIMM that is on the front line about to be run over by Apple not the '2nd tier' manufacturers. Apple is employing a classic top down sales strategy starting with a high priced handset and in the coming 18mos filling in the price gaps underneath it.
Nokia who holds the largest market share with many inexpensive handsets will be the last to feel the effects of Apple
However Apple has quitely declared that ALL phones in the future will be smart phones and as features currently considered 'smart' become manadatory on even the cheapest handsets even Nokia weill lose significant market share to Apple who not only has invented this new phone market place but essentially monopolises many of its feature sets and equally importantly holds a monopoly on the seamless integration between feature sets
Step back a little and look at the bigger picture beyond a couple of too late copycat handsets from Rimm and try to poduce quality quantative research
Total market share is meaningless for stock performance.
The stock story is what amazes me. People in New York love blackberries and AT&T service in NY appears to be spotty. So all the analysts love Rimm and hate Apple. Outside of New York I see the blackberry as a loser's device which shows you are tied to work. The high end consumers and professionals buy iPhones.
Let's not pound on Changewave here. They are presenting their study with their information. Take it for what it represents. Sure I would do a different study but that's OK.
I agree with the one-trick-pony thought. RIMM will hold off for a while, probably several years, but slowly they will be marginalized. Their best hope is to go with Android. Linux based systems are the best hope for Apple alternatives. There is a real need for a second player in the market to keep Apple honest. Power corrupts and absolute power corrupts absolutely. (Vodka anybody?)
IMHO
So reports are Foxconn is maxed out at 800,000 units per week - and you still have a 2 week wait on ATT! I believe the numbers. Soon 20 more countries, including INDIA!
Yesterday and today, it looks like maybe the street is beginning to figure it out. The banalysts can jump and shout and say NAY NAY NAY. But the numbers talk - and they can walk.
IMHO
However, one could tell Apple has captured a significant portion of the smart phone market by its SP performance. This is all shaping up to become a short for RIMM and a long play for Apple. By Christmas, RIMM will be punch drunk from Apple's reported sells and the analyst will have to take notice of the iphones contribution to Apples top and bottom line.
Big money was betting on RIMM and they have clearly choosen the wrong race horse. These low tech investment gurus have provided a great opportunity for small investors to benefit from Apples rise to mobile phone prominence. RIMM should go down by 1Q09. Nokia will take some time--perhaps another year. Motorola is dead in the water and neither are prepared for the next iphone platform that will catapult Apple market share of all mobiles above 10%. These are great times for the retail investor. Big money will not be able to ignor a 12 million plus 4Q08 iphone 3g sales.
So - you going to buy a Mac now?
:)
The Kickstart is ironically aptly named, as it will likely be the last resort in an attempt to resuscitate a dying brand.
Just launched the Bold in Chile. RIMM knows they are losing market share and is clearly working on remedying this asap. Chile is most likely only the beginning. RIMM has put a lot of money into the BOLD phone, no doubt. After its launch, RIMM up, up, up. Not to mention they just slashed the prices of there Blackberry's this week. I've seriously had two friends come home already with new Pearls. I'm not saying we're going to see anything drastic from RIMM soon, but there is definitely room for long time growth. Sentiment hasn't been the strongest for RIMM, but I believe will see it gradually move up as it started to today (predictwallstreet.com/...). Clearly, management has some work to do, but once the iPhone buzz wears off, this should recover slightly. We may not see the days of 140 any time soon, but perhaps close.
$50 pearl w/ best-in-biz verizon service.
the iphone is years from bringing aapl to the top, the thing is too expensive. RIMM, like CSCO, live and die by the financials, cuz when 100B cap companies partner with, it doens't matter too much if there're a couple mall shortages for your competitors. scale, people, scale.
to elaborate slightly, I referred to cisco & financials because that partnership is very similar to RIMM and other major business contracts. how the financial sector performs is often a bellweather for CSCO's future, because the largest banks provide cisco with ENORMOUS contracts in order to wire & network all of the offices.
i had recently had cisco pitched to me because they had a new toy in the works, WiMAX, which provides wireless, instead of for a room or house, for a 5 mile radius, college campus, urban zone, etc. HUGE potential, right? WRONG. the toy is nifty, but even if 3000 college campuses install it, that's still GENEROUSLY only a B or 2B. meanwhile the biggest firms on wall st. give cisco 10 times that to keep their systems state of the art.
RIMM and AAPL are the same. just because malls are selling out of the iphone, doesn't mean RIMM's kicking the bucket. every office building in every major city is packed to the gills w/ RIMM devices, and just because a bunch of teens & 20s are buying iphones, that doesn't outweigh the vast majority of the work force in America & beyond.
Not Yet, but in 12 months.........
and tens of million iphone purchasers is a tad more than a 'bunch.
Not even Apple can be expected, in a few months, to unseat an incumbent which has had a few years headstart (and is now playing catch up technology wise).
Inferior camera.
Inferior display.
Inferior push email.
A totally locked down phone who's only "smart" capabilities include forcing you to purchase yet MORE Apple software.
Any Window Mobile phone will pulverize the iPhone in power, features, and flexibility.
Try installing Bit Torrent on your iPhone. Can't.
Try watching a DivX on your iPhone. Can't.
Video calling? Can't.
3.2 megapixel camera? Nope.
There is no cutting edge technology whatsoever involved with the iPhone. Almost every single smart phone on the market is capable of 3G network speeds. But every other phone's display capabilities FAT outstrip the iPhone.
The point being missed by most (but not all) on this blog is that the iPhone is NOT, repeat NOT, a phone. It's a mobile computer. I think it very amusing that there is a continual flow of "rumors" surrounding the possibility of a tablet Mac, and meantime the tablet Mac is here. It's the iPhone, a tablet Mac, just a bit smaller (for the time being). And as our friend above just demonstrated, there is a literal army of developers out there willing to make sure that any iPhone shortcomings are quickly overcome by appropriate application innovation that is instantly available through the AppStore!
Now, to those of you out there who think that AT&T is going to sit on its tuchuss and not expand and improve its 3G service in the NYC area, you must be living in a fools' paradise. Ergo, the disparity, whether perceived or real, between Verizon and AT&T and therefore between RIMM and Apple service will shortly become less and less of a factor. This will of course have its inevitable effect on more and more corporate users not only because of service improvements, but because of the advent of MobileMe (a far better implementation of push technology than any competitor's model), and perhaps even the iPod's influence away from the office. (What, you think that corporate BB users don't have families with iPods?)
That may sound weird, but it's an intriguing thought: what if, as a natural progression, mostl current iPod users decide to upgrade? Now let's see: if they're going to upgrade and they have the iPod and a cellphone, wouldn't many think that it made more sense to combine the two devices instead of having to keep separate ones? Gee....I wonder what device they'd be likely to pick? The numbers then become fairly staggering for Apple!
As I stated two nights ago: $180 to $185 by the close Monday. Let's see how good a "Nostradamus" for Apple I turn out to be.
You all are accurate in believing how wonderful the iPhone is. It is. Truly an awesome device. A great platform that will develop and get better and better. I love my iPhone.
BUT, you need to understand economics to see why RIM has an advantage to take huge amounts of market share from Motorola, Samsung, and Nokia even when iPhone is exploding.
There is HUGE demand elasticity in data pricing. All you guys here simply accept whatever the monthly data charge is and pay it happily to have the iPhone. But the vast majority of people are very price sensitive and may not want to pay the full $30/month for data services. However, they might pay $10/month extra to have a great email service. This is where RIM comes in and is uniquely positioned to expand. They are actively working with carriers to offer flexible data pricing plans for BBs. This drives huge adoption in every carrier they have done this.
Apple could never do this. Why? The posters above say it all - they are addicted to the iPhone and use huge amounts of data/bandwidth. In fact, I wouldn't be surprised to see AT&T try to tier the iPhone data plans because of this.
So, on one hand you get an iPhone sub that costs you more money upfront (larger subsidy) and taxes your network but offers a great experience and on the other hand the BB offers you a high value customer (typically higher ARPU) but respects the network's bandwidth due to the BB architecture which compresses all data.
Economics usually end up winning out, so before you guys call it game over for RIM, you might want to delve deeper into some of these issues that affect actual end user sales AND incentives that carriers have to sell one product vs another.
Oh, did I tell you I love my iPhone? I did, but interestingly enough, I USE my Blackberry because it does everything I need it to do very efficiently. Funny how personal choice affects end use as well.
Disclosure: Long AAPL & RIMM
You meant to say it doesn't? Oh dear.
(Oh, and I'd ask the poster above if he knows all 3 of the teenagers in the world that need to have BitTorrent on their phone. Or watch DivX..? )
The results will speak for themselves, not the share price, because as we know there is a lot of nonsense, and talking down of APPL at any opportunity. Whether the lowball forcast, Jobs' health, options and all the other techno-FUD like 'Macs are twice the price' and other twaddle.
If you want to go long my friend, don't go RIM, go APPL. Free advice.
Oh, and there is one other thing that keeps APPL down, Wall Street doesn't like popular stocks after taxi drivers start tipping and buying them. APPL has a massive army of loyal users and promoters which makes them nervous. So just buy more while they're cheap and you'll be in the money soon enough.
Of course the iPhone is a mobile computer/tablet/slate whatever, you're right.
What is predicted though is not 3.5" but 6" or 8"....
I doubt Apple wanted to be in the cell phone business, but it is a great catalyst.
The iPhone is only available in the US from AT&T, so it's attractiveness is going to be limited to that segment of the market willing to "suffer" AT&T's network.
The iPhone is designed for the consumer, not the business market, though AAPL has opened the door to "compete" in the business market, by making the iPhone compatible with corporate email Exchange servers. Big deal.
I don't think AAPL is so focused on the business market, but for some reason, RIMM, or the so-called "pundits" who write about RIMM, are running scared. If the BlackBerry is all it is "cracked" up to be, why the fear?
In disclosure, I own a BlackBerry Curve, after having a replacement (i.e. re-furbished) Treo from Verizon crash on me. The tech supervisor steered me away from getting another Palm phone. That says a lot. I settled on the BlackBerry, & all I can say is that I'm not impressed. I don't fine the email UI that great, & the browser slow as well as problematic due to the extra relaying that takes place between my phone, BlackBerry servers, and the web page I'm linked to.
Notwithstanding, I would not even consider an iPhone until it was offered by Verizon Wireless, as I value the network more than I value the phone.
Bottom line, I don't think BlackBerry has much to be concerned with, and neither does AAPL for the foreseeable future. But let's re-visit this issue in a year or two, & see what inroads AAPL is able to make in the business market with its 3G iPhone. I'm willing to bet it is not going to be as great as some hope (AAPL cheerleaders), or as some fear (RIMM). JMO.