RIM, BlackBerry Enter New Territory

September 28, 2008 Updated: October 1, 2015

A model displays Canadian electronics maker Research In Motion's BlackBerry Bold smart phone in Tokyo. The new BlackBerry which can use high-speed 3G and IEEEa/b/g wireless LAN network will be launched in Japan early 2009.  (YOSHIKAZU TSUNO/AFP/Getty Images)
A model displays Canadian electronics maker Research In Motion's BlackBerry Bold smart phone in Tokyo. The new BlackBerry which can use high-speed 3G and IEEEa/b/g wireless LAN network will be launched in Japan early 2009. (YOSHIKAZU TSUNO/AFP/Getty Images)
NEW YORK—Shares of Research In Motion Limited (RIM), the Canadian maker of BlackBerry smartphones, dropped more than 25 percent after the company reported a quarterly profit, but announced disappointing projections for the rest of the year.

The company’s stock has retreated sharply during the last quarter as investors fear that marketing expenses related to new product launches and weakness in the corporate market—where RIM is the market leader—would erode profits.

RIM’s e-mail friendly BlackBerry devices have long dominated the corporate and government spheres. But as smartphones gained popularity, the company launched more consumer-friendly smartphones with media-playback, picture-viewing, and other entertainment features.

Two new smartphone devices, dubbed “Bold” and “Thunder,” will debut in the Untied States in the third quarter. The phones will compete with Palm, Windows Mobile, Apple iPhone and T-Mobile/HTC G1 devices in the consumer market.

Investors are worried that sales of high-end cell phone devices may suffer as consumers tighten discretionary spending on fears of an economic recession. Analysts also question RIM’s pricing and execution strategy in a fiercely contested and fickle consumer market, where the selection of phones far outnumbers that of business devices.

RIM projects third-quarter expenses to increase by around 12 percent, primarily driven by research and development costs and marketing costs.

‘Land Grab’

According to the company, BlackBerry added 2.5 million new users last quarter. The finding RIM was most proud of? Sixty-percent of new users were “non-enterprise” subscribers.

On a conference call with investors and analysts, RIM CEO Jim Balsillie said that as mobile technology advances, e-mail and web friendly smartphones will become the dominant mobile device among consumers in the near future—and RIM is readying several devices that cater to that segment.

Referring to RIM’s 54 percent market share in smartphones, Balsillie said that the company has “An opportunity to keep that and extend it as [smartphones] become the main interface for darn near everything in people’s digital lives.”

“A land grab is not a bad metaphor for what’s going on right now, or sort of mass adoption or mass displacement,” he added.

RIM is introducing three new smartphone devices starting this month—the “Pearl Flip,” the “Bold,” and the “Thunder,” the most aggressive manifestation of BlackBerry yet.

At the CITA trade show in mid-September, RIM introduced the BlackBerry Pearl 8220, a flip version of its popular Pearl slim phones. The phone will be carried exclusively by T-Mobile.

RIM also will debut the “Bold”, available on AT&T Wireless, next month. The “Bold” is an update of its current “Curve” series of smartphones, and includes a screen updated with higher resolution and a new graphic user interface.

To counter the popularity of Apple’s iPhone, RIM will also unveil its highly-anticipated “Thunder” device later this year. The “Thunder”—a Verizon Wireless deveice—is a touch-screen smartphone with a 3-megapixal camera and global roaming capabilities.

Can RIM take the consumer smartphone market by storm, or will its sales languish as corporations cut IT spending and its consumer devices get lost in the iPhone and Google Android rush? As the holiday shopping season approaches, it’s a development that bears watching.