BlackBerry busted - iPhone success sees analyst RIM downgrade

Wed, 07/16/2008 - 6:34am — Jonny Evans

Demand for the iPhone remains "unabated" since the product launch last week, pitting Apple and Research In Motion (RIM) in a two-horse race for dominance of the smartphone industry, and at least one analyst believes it's not RIM which holds the winning hand.

Needham&Co. analyst Charlie Wolf this morning downgraded RIM stock from Hold to Underperform, warning that sales of the iPhone 3G seem poised to "blow through everyone's forecasts."

Apple this week confirmed one million iPhone 3Gs were sold in just three days. While we all experienced problems both at retail and when trying to activate the devices as the iTunes servers just couldn't cope with the demand, Seeking Alpha today called the launch the "biggest consumer electronics launch ever".

Consumer it may be, but Apple's made a pitch to the enterprise, also - and RIM is bound to be impacted, Wolf warns: "While RIM's dominance of the enterprise market appears secure, at least for now, the company's great growth driver-the consumer market-is bound to come under siege because of the iPhone. We're cutting RIM from a hold to an underperform rating and reducing estimates."

RIM earned $482.5 million in its first quarter which ended 31 May, double the revenue of the year before, but under expectations. The company hopes to take on Apple with the BlackBerry Thunder, a touchscreen device, and says it expects to achieve better results on strength of sales in the consumer market. But will the plan work? Wolf is clearly unconvinced.

"Much of Blackberry’s success stemmed from a paucity of competitive offerings from other smartphone manufactures. That ended on July 11 with the introduction of the iPhone 3G. Apple announced that it sold over one million phones in just three days. And our checks indicate

that demand has continued almost unabated since then."

The analyst warns that while its no fight to the death between the two firms, the iPhone will cut into BlackBerry's incredible growth in the consumer smartphone market.

And RIM has no guarantees: "RIM’s counting on new iPhone look-a-likes to stem the tide," the analyst notes. "While these models should enjoy some success, they have no hope of matching the secret sauce of the iPhone - the tight integration of hardware and software that creates a unique user experience. Nor do they have any chance of evolving into an application development platform like the iPhone. wireless solutions for the mobile communication market worldwide."

It's the iPhone's software development that lends it its extra sauce, the analyst explains in his in-depth briefing to clients.

"The interest of the software development community has been overwhelming. Unlike the PC market, there has never been a viable application software market for smartphones because of the dramatic difference in the form factors of PCs and smartphones," he notes.

"Over 800 titles have been released for the iPhone through the iTunes App Store. We expect this number could top 10,000 within a year," he said, pointing out that the device's ability as a games console means it will become a "must-have product for teenagers already addicted to their iPods.

"The lock-in effect the iPhone software creates should insure a staggering installed base for the device," he adds.

Wolf doesn't believe RIM can match this. "It’s the superb integration of hardware and Apple’s OS X operating system that makes the device one of a kind. BlackBerry’s Java development tools are primitive in comparison. In our opinion, RIM has no hope of catching up on the software front, which promises to be the next battleground in the smartphone market," he writes.

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Comments

Excellent news. Take that

Wed, 07/16/2008 - 7:09am — 9to5Mac Toob (not verified)

Excellent news. Take that you nasty lame little Crackberry devices! Next time they come to an online party they'll better bring a real browser.

iPhone = mobile Internet

Wed, 07/16/2008 - 9:12am — Mac fan in a M$ world (not verified)

The long term potential of the iPhone is as a mobile Internet appliance. As soon as there are third party applications to edit Office docs, I can leave my laptop at home. With 3G wireless, I can stay connected globally.

Apple is playing this very smart - using the iPod + cell phone convergence to drive consumer sales and build an install base. Then the third party developers will carry the ball for Apple to build the additional cpaabilties.

Yup. RIM is done for. It

Wed, 07/16/2008 - 10:58am — Olternaut (not verified)

Yup. RIM is done for. It won't happen overnight though and not without a bloody and gruesome fight. But in the end....RIM is done for.

Go USA

Wed, 07/16/2008 - 10:59am — Go USA (not verified)

Finally the US of A is taking its rightful place as the leader in the mobile arena as well. Ever since the decline of Motorola, one had to put up with nonsense from the Europeans and Canadians each claiming they are no. 1 even though their mobiles were clunky and had poor utility beyond basic voice calls. With the iPhone, USA rules the mobile world again and pushes the pretenders out of the way. As long as software is the key differentiating factor, there is no chance RIM or Nokia can ever match what the US and Silicon Valley can do.

Sorry for that, international

Wed, 07/16/2008 - 11:12am — admin

Sorry for that, international readers. Sometimes we don't realize that we are the Microsoft of the world.

"rightful" place...

Wed, 07/16/2008 - 12:58pm — Kev Orng (not verified)

"rightful" place... interesting.

Just out of interest, who exactly is it that makes these kinds of judgments about which nations has which rights over which other nations? You? God? Which god? As gods go, I guess Hermes or Mercury are probably the ones making decisions about who has the right to dominate the mobile industry, but I would think they'd be rooting for the Europeans.

wow...

Wed, 07/16/2008 - 2:46pm — DanishGuy (not verified)

I think you are kinda aggressive. You talk of USA like it's the center of the Universe. It isn't like the world has forgot you. Give room for others, it isn't like you aren't the no.1 country in alot of other stuff.

...but again, what do I know? Im just a stupid European

Exactly! Stupid Europeans...

Thu, 07/17/2008 - 6:51am — 9to5Mac Noob (not verified)

Exactly!

Stupid Europeans... ;)

I don't buy the argument

Wed, 07/16/2008 - 11:41am — 9to5Mac Noob (not verified)

I don't buy the argument about the iPhone as a the next killer gaming platform.

Yes, some of the games are very cool and the accelerometers are making for some interesting game play.

However, the phone is WAY underpowered as is seen from the regular pauses that occur during game play.

In addition, it's not a very friendly form factor for the most popular titles.

I think what this will do is be very attractive to the casual gamer, but not to the broad swath of teen gamers.

I'm still holding out for a DS-style iPhone slider that has a second touch screen on the slide out. That, coupled with a more advanced CPU and possibly a dedicated graphics chip, could prove to be a game changer.

That said, many of the graphics on this thing are beautiful if not downright stunning.

Does anybody know if any of the games are using the WiFi/EDGE/3G for downloading content updates at this point? I'm wondering if any of them are doing that to add new levels or keep the media footprint of their games down.

I love Macs and the iPhone; I

Wed, 07/16/2008 - 1:21pm — Kev Orng (not verified)

I love Macs and the iPhone; I own three Macs, and use two more at work. There are twice as many iPods in my house as people. I don't have a smartphone, but my wife has one work-provided blackberry. In spite of my Mac cred, I can not understand the online enthusiasm for destroying RIM.

Disclosure: I live near RIM, and therefore I know people who are professionally connected to RIM in various capacities.

RIM is not like Microsoft. You can howl for Microsoft's demise, and I'll cheer for you, but RIM has been investing back into their community since day one. First the University, and now community programs as well as research facilities that draw brighter academic minds to the region.

Case in point: Stephen Hawking is apparently mulling over an invitation to move to RIM's Perimeter Institue. Google it. His long time colleague Neil Turok has already taken over the administration of the facility. CIGI, across the road, also RIM founded, is advancing the field of political science and international governance research around the world.

And yes, none of you live here and probably don't give a hoot about any of that, but you simply can't make a plausible case that RIM should be destroyed simply because they make a competing cell phone.

Does everyone understand the kind of research RIM is investing in with the Perimeter Institute? In ten years, the Blackberry will probably have a quantum processor core and it will teleport you to work.

I don't think RIM should be

Wed, 07/16/2008 - 6:27pm — 9to5Mac Noob (not verified)

I don't think RIM should be destroyed. I think the Blackberry should be destroyed. Look at how it has kept the corporate world hostage all these years with its crummy design. It's only now that Apple has entered the market and forced a major paradigm shift that RIM (along with the other cell makers) are crapping their pants. What are they doing to compete? Badly copying Apple's ideas. In ten years if the Blackberry has a quantum processor core and teleports you to work it'll be because Apple did it first.

Here comes the Apple iPhone 2.0.

Thu, 07/17/2008 - 4:01pm — smook (not verified)

I'm in Canada. SOLD OUT on the first day. If you didn't go to a Rogers store or order online or call their offices you now are waiting... ! I got one for testing. I did have an iphone 2g (original) which I bought in the US. Actually it works as well, but only at version 1.1.4. Iphone is a movement. It's going to snowball with the packaging, AppStore and it's design. Apple does it again! I've switched from the RIM to the iPhone.