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iPhone and the Future of RIM

Posted on Monday, Apr 23rd 2007

Frank Levinson wrote an important piece when the iPhone was first announced. As we approach the launch of the iPhone, I would like to review what is going on in the rest of the ecosystem, and how the players are preparing.

Let’s start with RIM. The company has recently announced results, and after a strong 6 month run up, the stock dropped sharply because results met, but did not exceed expectations. [52-wk range: $67.95 – $171.46]

rim chart

So what are the expectations around RIM vis a vis the iPhone?

The iPhone, for the next 2 years, I believe, is going to be a classical Consumer product and build upon its iPod legacy, focusing squarely on the media player capabilities (Let’s call this the Consumer Smartphone).

RIM, on the other hand, is a classical Prosumer/Enterprise product, where the competitor is less Apple, more Palm, Motorola and Nokia. This means, that RIM and Apple are by and large not competing for the same customer base. RIM, in its segment (Prosumer SmartPhone), is the second most popular vendor, behind Nokia, having overtaken Palm.

Apple’s innovations: 3 things –

1. The use of OSX – this choice empowers the device to be able to run Safari, mail and widgets. It continues to unify the Apple product line, not fragment it.
2. The use of a new consumer user interface (UI) and the deletion of so many buttons and choices (this was what we did about 16 years ago with Windows and 23 years ago with the first Mac and now we are doing it again).
3. The realization that Moore’s law scaling of silicon is continuing and this makes the possibilities of integration infinite.

These 3 innovations offer up the opportunity for Apple to become the laptop replacement.

The longer term story may, therefore, become very different, as Apple expands out of the Consumer segment, and uses its “Ultimate Convergence Device” positioning to go after small laptops, NOT just the SmartPhones. This would require them to address issues like an enterprise class messaging system, the core differentiating function for the RIM Blackberry lines. However, that is still probably a few years out.

While on the hardware side, Moore’s Law is driving all the mobile handset vendors towards hyper-integration, the OS and application layer capabilities on each system is dramatically different. MAC OS certainly has the most power. But it doesn’t work very well with the rest of the enterprise software ecosystem. Not yet, anyway. This will be the reason for Apple’s limited penetration in the Prosumer segment.

There is one more unknown in this equation yet. Apple’s bet on a touchscreen ONLY User Interface requires a 2-hand usage model. Blackberry is a one-hand device. How will the market respond to the change?

Finally, pricing. Apple’s pricing strategy positions the iPhone against the laptop, not the Smartphones. I don’t think all the Smartphone customers will abandon their laptops quite so rapidly, even though, they would eventually very much like to do so.

Eventually, RIM’s competition is not only going to be Apple and the iPhone. It will also be the laptop vendors, and that is when the game will start to get really exciting. And this is also why, I don’t consider RIM a long term Hold. It could, however, be an excellent acquisition target for Dell, especially, who desperately needs a convergence device strategy, and needs to buy either RIM or Palm.

Meanwhile, Apple continues to keep the industry on its toes, and every few months, sends everyone back to their drawing boards.

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[…] are discussing the impact of iPhone on the rest of the cellular handset and laptop ecosystem. Frank Levinson wrote an important piece when the iPhone was first announced, which you need to […]

Sramana Mitra on Strategy » Blog Archive » iPhone and the Future of Nokia Tuesday, April 24, 2007 at 9:11 AM PT

[…] are discussing the impact of iPhone on the rest of the cellular handset and laptop ecosystem. Frank Levinson wrote an important piece when the iPhone was first announced, which you need to […]

Sramana Mitra on Strategy » Blog Archive » iPhone and the Future of Nokia Tuesday, April 24, 2007 at 9:11 AM PT

You have very clearly delineated the Consumer segment and Professional Consumer segment. My more than 2 cents 🙂

Its a well known fact that the prosumer base is not going to jump on to iPhone due to the classic integration problems of OS X with their enterprise/corporate systems. After all who wants to be the guinea pig?

Most of the music savvy consumer segment already have iPods worth 200USD or more on avg. Would they be interested in buying a 450USD device and add the data plan irrespective of whether they need internet connectivity all the time? I doubt it.100USD on a cell phone bill (2400USD in 2 yr contract) equals to a Mac Book Pro. AT&T might be able to sell a lot of iPhones for Apple and also increase their customer base if they are willing to sell it without data plan. I agree that Apple and Jobs have their eyes set on the “Ultimate Convergence Device”. iPhone is the first step in that process. The future of this strategy might depend a lot on the success/failure of iPhone, Not only for Apple but also for other vendors like Nokia, RIM, Samsung, Moto etc.

Sivakanth Mundru Tuesday, April 24, 2007 at 1:14 PM PT

[…] wrote in an earlier piece, that the iPhone is most likely to be positioned against laptops, as a convergence device that eliminates the need to have to carry around multiple devices. Frank […]

Sramana Mitra on Strategy » Blog Archive » iPhone and the Future of Laptops Wednesday, April 25, 2007 at 11:37 AM PT

[…] that, it was “iPhone and the Future of Laptops“: “I wrote in an earlier piece, that the iPhone is most likely to be positioned against laptops, as a convergence device that eliminates the need to have to carry around multiple devices. […]

The Law of Mobility » Blog Archive » Sramana Mitra on the impact of the iPhone Friday, May 11, 2007 at 8:51 AM PT

[…] don’t see it as a business use machine quite yet, and not until the keyboard issue is addressed. RIM, Palm – not to […]

iPhone24-7.com Anything & Everything iPhone & New Gadgets » Blog Archive » A Look At Apple Since The iPhone Launch Tuesday, July 31, 2007 at 4:29 PM PT

[…] with this post on RIM, I will look at some major players that the iPhone will be competing with. An earlier post on RIM can provide good background for this post. In it, I have suggested that RIM does not directly […]

iPhone Competitors: RIM - Sramana Mitra on Strategy Tuesday, August 7, 2007 at 7:43 AM PT

[…] with this post on RIM, I will look at some major players that the iPhone will be competing with. An earlier post on RIM can provide good background for this post. In it, I have suggested that RIM does not directly […]

iPhone24-7.com Anything & Everything iPhone & New Gadgets » Blog Archive » iPhone Competitors: Research in Motion Wednesday, August 8, 2007 at 8:13 AM PT

[…] iPhone and the Future of RIM and iPhone’s Competitors: RIM […]

iPhone’s Competitors : Synthesis - Sramana Mitra on Strategy Friday, August 17, 2007 at 7:56 AM PT

[…] But the iPhone is after all the iPhone and I bet there are millions of enterprise users who have been waiting for the iPhone to get into the enterprise. And once Apple irons out the kinks, it would be using its “Ultimate Convergence Device” positioning to go after small laptops, NOT just the SmartPhones as we discussed in an earlier post, iPhone and the Future of RIM. […]

RIM Thunders - Sramana Mitra on Strategy Wednesday, June 11, 2008 at 10:15 AM PT