RIM Jazzes Up BlackBerry

Research In Motion has jumped into the retail market offering products with more lifestyle features, while exposing itself to shoppers’ fickle tastes and competition from Apple’s iPhone.

Products such as its pink BlackBerry Pearl, a candy bar–shaped mobile phone and e-mail device, will now offer television, music, cameras and Facebook social-networking software for broad appeal.

“I think the whole social networking phenomenon is quite substantial,” RIM’s co-CEO, Jim Balsillie, told Reuters.

His comment highlights a big shift for the Canadian company, which first made its name supplying blocky handsets that executives, lawyers and politicians used to send secure e-mails to their offices and clients.

The departure from that mainstay has produced strong early results, as RIM added BlackBerry subscribers at a rapid clip and posted profits that consistently beat analysts’ expectations.

More than a third of RIM’s subscribers are now classified as noncorporate or nongovernment. The company had a total of 12 million users following the quarter ended Dec. 1.

The Pearl, the main product in the consumer push, looks more like a regular cell phone than the traditional BlackBerry. Launched in 2006 at around $200, it’s now given away by some carriers as part of a long-term service contract, while declining plan prices are making the gadget more affordable.

The retail effort reached a critical milestone on November’s Black Friday, the day after U.S. Thanksgiving, which marks the start of the holiday shopping season. It was, for the first time, RIM’s strongest single day for net subscriber additions.

The strategy has also put the company in head-on competition with the iPhone, launched in the United States at the end of June. RIM, however, has insisted it has nothing to worry about, and Balsillie shrugged off talk that Apple may target business clients.

“Apple is certainly free to innovate and come into the market, but they are particularly strong in the consumer side,” he said. “Who knows if they can come across to enterprise?”

U.S. recession worries

Some analysts say retail and corporate customers could scale back BlackBerry spending if the United States, RIM’s biggest market, slips into a recession.

“Part of what they have going for them is that they have a desirable product, so that’ll help,” Brian Modoff, a Deutsche Bank analyst, said of RIM. “That doesn’t mean that the rate of growth doesn’t slow,” he added.

After more than quadrupling in value since mid-2006, RIM shares are down more than 15 percent so far this year.

Canaccord Adams analyst Peter Misek this month bestowed a rare rating cut on the stock. He reduced the shares to “hold” from “buy” because of concerns about the U.S. economy and that its weakness might lead corporate clients to delay buying newer BlackBerry models.

Balsillie said economic turbulence in the United States should have a limited negative effect on RIM. As for retail consumers, he thinks they are more likely to defer larger purchases like cars or houses rather than part with the BlackBerry.

Mobile phones are no longer seen as luxury items, Research Capital analyst Nick Agostino noted.

“Today, it’s the exact opposite,” he said. “It’s almost like a safety blanket, just knowing that you can be reached and you can reach someone at any given time has now become a necessity in society.”

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