November 9, 2005

Blackberry Faces Tougher, Cheaper Competition

AMSTERDAM -- Nokia and Microsoft are almost giving away software to muscle into the wireless e-mail business now dominated by Research In Motion, the maker of the popular BlackBerry.

Around 1 percent of the world's 650 million corporate e-mail accounts are plugged into hardware and software that forwards incoming messages to a mobile device. More than half of those, about 3.65 million, use RIM's BlackBerry.

"Most of those 650 million will be mobilised within three years," said Scott Cooper, vice president for mobility solutions at Nokia's Enterprise Solutions group.

The reason for his optimism is that Nokia, like Microsoft, will practically give away wireless access to business e-mail.

Their new products may leave investors wondering how RIM will compete, rekindling memories of companies such as Netscape, which had to give away its Internet browser when Microsoft decided to do so.

Nokia is offering companies a new 1,800 euro Nokia Business Center server. After it is installed, then the basic service of receiving and sending mail from behind the security firewall is free, even when given to hundreds of staff.

"We're making such a big leap with a different architecture that it enables different economics," Cooper added.

Analyst Andrew Neff at Bear Stearns says Nokia and Microsoft have interesting products but no market share. "For now, Blackberry is the only game in town and pricing it that way."

Vodafone in Britain advertises the BlackBerry Enterprise server for 3,450 pounds for the first 20 users. The next 500 users cost an additional 20,000 pounds.

Vodafone then charges a 28 pounds monthly for 6 megabytes of domestic e-mail downloads, plus an additional pound per extra megabyte inside Britain or 8.75 pounds outside the country.

By comparison, many corporate users already pay a fixed monthly fee for a large bucket of mobile data. Mobile e-mail from Nokia or Microsoft servers would fit into that package.

BlackBerry devices start at 189 pounds, while the cheapest rival products are priced below 300 euros.


Nokia is willing to take a long-term view of the market, because the pay-off does not have to be in sales of server software but in potential sales of thousands of Nokia phones to employees at a company in order to read their wireless e-mails.

"When all is said and done, Nokia is primarily a mobile phone company. Any additional activities are largely incremental," said Ben Wood at market research firm Gartner.

For Microsoft, it's about sales of additional products rather than the wireless server software.

Firms which already own Microsoft's Exchange Server 2003 for Outlook e-mail can upgrade freely from early 2006, allowing them to push messages to devices running on Windows Mobile 5.0 software, which include various operator-branded phones and Motorola phones.

"There is no additional cost, no middleware, no service fee. The only thing that might come up is a new device running Windows Mobile 5.0," said Hardy Poppinga, European product manager for Windows Mobile and Embedded devices.

An estimated 126 million employees use Microsoft Outlook.

RIM's key strength is that it figured out how to securely send an email to a wireless device through a corporate firewall many years before anyone else managed to do that.

With its business growing fast, some 70 percent of RIM sales are currently generated by BlackBerry devices, although RIM has stressed its main activity is software and services.

The focus on devices is seen as a weakness by some analysts, because it means RIM has to compete with much bigger firms such as Nokia and Motorola, which do nothing but design attractive handsets for many different users to fit personal preferences.

RIM did not return phone calls seeking comment. The company said earlier this year, however, that it would offer cheaper devices and a simpler set-up.


The market opportunity of wireless e-mail has also attracted competition from companies that deliver software only and do not make devices, such as Good Technology, Visto and Seven.

Vodafone will use Visto software to drive its own-branded push e-mail service. The service is already live in France, Germany, Italy, Spain, Finland and Greece.

Nokia first announced a collaboration with RIM two years ago, agreeing to put RIM e-mail software in a selection of its phones, but since then RIM has increasingly become a rival.

Nokia Chief Executive Jorma Ollila, in a recent conference call, made clear that Nokia had now developed a variety of e-mail options by itself and with different companies.

"We have a contract with them (RIM), and we will support them when we see fit," he said.

Analysts say the analogy between RIM and Netscape fails in that BlackBerry is the premier name in wireless e-mail products, while Netscape's browser was not materially different from Microsoft's.

But as mobile e-mail extends past the elite of investment bankers and senior executives, fewer people will demand the top-name product.

"What customers want is their e-mail, and if there are lower-cost alternatives, that is a competitive threat to RIM. I am loyal to RIM, but I am really loyal to my e-mail," Neff said.


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