The BlackBerry works on some 350 wireless networks.
Tyler Lessard grips his BlackBerry in a familiar pose, head bent as he focuses on the screen with fingers punching madly. But it isn't E-mail forcing him into a bow sometimes called the "BlackBerry Prayer." An executive at the device's Canadian manufacturer, Research in Motion, Lessard is demonstrating a new side to the ultimate corporate communicator. He's playing Guitar Hero III.
His performance is ok, although unlikely to remind anyone of Jimi Hendrix or Slash—or even infomercial guitar god Esteban. But prowess isn't the point. It's that the game even exists, says Lessard, who works with outside software developers. RIM even promoted Guitar Hero on the BlackBerry home page, which for years kept a staid, corporate tone. "I hope that's a sign of things to come here," he says.
Nearly a decade after unleashing E-mail from PCs, the BlackBerry is breaking free of its own corporate constraints. RIM essentially created the market for wireless E-mail with its private, enterprise-oriented network. Its BlackBerry also embraced other productive pursuits: basics like calendars, address books, and documents and sophisticated software for specialized tasks like dispatching sales, support, and other mobile forces. Along the way, RIM wrapped in a phone to make BlackBerry the most successful smartphone in North America.
Now the company is targeting individual business users and even homebody consumers. Sleeker, more stylish BlackBerry Curve and Pearl models even come with cameras, games, and social networking. They helped push its subscriber list to a record 14 million at the end of February, up from 8 million a year earlier. RIM added 2 million subscribers in the most recent quarter alone—about half were individual buyers. Total sales doubled last year to $6 billion and likewise profits to $1.3 billion. As interest in smartphones accelerated, RIM's stock doubled in value each of the past two years.
Gaudy numbers like those draw competitors. Microsoft's longtime effort to get Windows Mobile onto cellphones has gained traction in the corporate market that RIM has ruled. Nokia already dominates smartphones in Europe and Asia and is eyeing a bigger role here. Consumers are expected to flock to upcoming phones with the Google-backed Android system, much as they did to Apple's stylish and multimedia friendly iPhone. "For years, there was clearly a distance between RIM and competitors," says Ken Dulaney, who tracks smartphones for Gartner, a market research firm. "That's no longer the case."
Rising tide. Executives appear unconcerned at RIM's corporate headquarters, which is less a campus than a scattering of nearly two dozen buildings across Waterloo, Ontario, a college town about an hour west of Toronto. If anything, RIM seems to be benefiting from competitors' success, argues Mike Lazaridis, RIM's founder and co-CEO. Apple is spending tremendously to market the iPhone, he says. That's raising awareness that a handset can do much more than the mainstream "feature phones" that most consumers carry. "People are walking into stores with a feature phone and out with a smartphone," he says.
The worldwide smartphone market grew roughly 50 percent in 2007 to about 122 million units, according to data from Gartner. That's still only about 1 in 10 of all cellphones sold, suggesting lots of upside.
"The opportunity for smartphones is virtually unbounded," says John Traynor, senior director of mobile communications at Microsoft. And while the three big players in North America—Apple, Microsoft, and RIM—compete fiercely, they aren't forced yet to just steal each other's customers. "The day will come when the market is saturated. We're nowhere near that yet," says Jeff Bradley, a senior vice president at AT&T, famously the exclusive carrier for the iPhone but also a leading seller of BlackBerry and Windows handsets.
AT&T and other wireless carriers love smartphones, which typically handle E-mail and more sophisticated functions than mainstream phones. That translates to higher carrier revenue from data plans, a trend that should accelerate as the handsets absorb more functions. Smartphones have become "voraciously convergent," consuming every portable in sight, says Avi Greengart, who tracks wireless handsets for Current Analysis. "The PDA? That's gone already," he says. "GPS navigator, you're next. mp3 player, we've got you in our sights." And hand-held game consoles are just behind.
Not that RIM execs would predict the BlackBerry will become the gaming platform of choice. While the company reaches for more consumers, RIM's personality remains tightly wed to its corporate roots. Lazaridis's comments repeatedly return to basics, including security and reliability—of a "stress free" day for users. He talks of engineering, design, and science and of trade-offs between features like big, sexy touch-screens and drained batteries. "There is a massive set of paradoxes that must be dealt with," he says.
Similarly, the RIM complex almost hums with sober seriousness. The company has been in business for 24 years; it was coincidental that BlackBerry launched amid the Internet bubble. No ping-pong tables or lava lamps of dot-com upstarts at RIM's buildings, despite most of them abutting a university.
That's the University of Waterloo, which Lazaridis, 47, left a month before graduating to found RIM. As an undergrad, he'd won a lucrative contract from General Motors for an early wireless technology. RIM eventually moved into paging. From there, Lazaridis could see that hand-helds would become something more complex. The gamble was if the technology was ready.
RIM chose to make sure by building an end-to-end system, a private network that links every BlackBerry to operations centers whose exact locations are treated as corporate secrets. They control the flow of data between corporate servers, such as those that handle a company's E-mail, and the 350 wireless networks on which BlackBerry operates. "It's why your BlackBerry just works when you step off a plane anywhere," Lazaridis says. It's also why RIM's service can fail, as it has in occasional, hours-long outages. RIM executives say they understand and are investing to minimize outages. "I get it. I get it," says co-CEO Jim Balsillie.
But the hiccups have helped competitors, particularly Microsoft, which has taken dead aim at RIM's corporate clients. "Routing data through a single point also makes it a single point of failure," says Microsoft's Traynor. Even Apple, whose iPhone was originally a consumer product, is targeting corporations by improving security. RIM, in turn, is said to be developing a touch-screen model to compete for customers drawn by the iPhone's big monitor and slick software.
Analysts say RIM needs new models to appeal to consumers, moving beyond its versions with a full qwerty keyboard and the Pearl's traditional keypad. RIM has proved an innovative company that's willing to do the unexpected, says Gartner's Dulaney. The company successfully moved from its hugely popular trackwheel to a trackball, which is better for Web surfing. Stay tuned for more handset changes, adds Balsillie at RIM: "There is no religion to what we do in packaging." The genuflecting instead is left to reliability and security, which RIM execs hope will be as important to consumers as to corporations. They think those basics will keep new customers bowing, with equal fervor and serenity, to new generations of BlackBerrys.
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