New BlackBerrys Are Ready, But RIM Seeks Carriers, Apps - Wall Street Journal

By SPENCER E. ANTE And WILL CONNORS RIM is hoping the new devices and software will convince CIOs that it's serious about reclaiming its corporate crown. Here are some questions CIOs should keep in mind, Steven Rosenbush discusses on digits. Photo: Getty Images. Research In Motion Ltd. has finally produced the phones. Now, the BlackBerry maker is relying in large part on outsiders to get them into the hands of consumers. After several delays and 18 months without a new smartphone, RIM plans to unveil two new BlackBerrys on Wednesday in a last-ditch effort to regain ground lost to Apple Inc. and Samsung Electronics Co. The support it gets from wireless carriers and software developers will help determine whether they catch on. The problem for RIM is that its much-diminished market share has eroded its leverage with both of those groups. Carriers looking for a counterweight to the iPhone and devices running Google Inc.'s Android system have lined up to distribute the new BlackBerrys. But they are also locked in negotiations to lower the fees they pay RIM to use its software and computer network. And while RIM has convinced developers to adapt some 70,000 apps for its new models, it has had to fill some big gaps—like an app for Facebook —by building its own versions. The result is RIM faces some deep disadvantages as it goes up against the market's leaders. Rameet Chawla, founder of Fueled, a New York company that develops apps for companies such as Hallmark and Porsche, said that around six to nine months ago it stopped getting requests from clients to develop apps for the BlackBerry platform. The strengthening duopoly of Apple and Android, he said, "is further crowding out all of the other options." RIM Chief Executive Thorsten Heins is to take the stage in New York on Wednesday to launch the phones and show off features the company hopes will resonate with consumers. The company is staging simultaneous events in Toronto, London, Dubai and Johannesburg, among other cities. RIM's market share has eroded substantially since it last released a new phone in August 2011. Apple and Android accounted for an estimated 87.1% of global smartphone shipments in 2012, up from about 68.1% in 2011, according to research firm IDC. RIM's share, meanwhile, fell to 4.7% last year from 10.3% in 2011, according to IDC. Carriers don't like the idea of a duopoly and are hoping that RIM or another operating system can mount a strong challenge. In an interview last week, AT&T Chief Financial Officer John Stephens said the BlackBerry "has had a good tradition to it, and we're hoping it will be successful." RIM wants carriers to order as many phones as possible and heavily promote them in stores. But carriers want to cut back the service fees they pay RIM and are using the BlackBerry launch as leverage, people familiar with the matter said. Wireless carriers pass through about $7 to $10 a month per corporate customer to RIM for use of its software and computer network that securely transmits email, Macquarie Capital analyst Kevin Smithen estimates. For retail BlackBerry customers, carriers pay about $2 a month, Mr. Smithen estimates. "Carriers are saying if you want us to order more devices, you have to give us a break on these service fees," said Mr. Smithen. "There is some horse trading going on." RIM wouldn't comment on the discussions, but said in its most recent filing that it "anticipates further declines in its service revenue in the coming quarters, which could be significant." The service fees will account for about 37% of RIM's estimated $11.3 billion in revenue for the fiscal year ending in February, according to Macquarie. Macquarie estimates that RIM service and software revenues will fall about 14% in the next fiscal year to about $3.6 billion. The uncertainty around service fee revenue, which has provided a stable source of cash flow, could also complicate RIM's ability to sell some or all itself, analysts said. Applications are also another area of uncertainty. Because the new BlackBerrys run on a new operating system, the applications that worked on older BlackBerrys won't work. RIM executives acknowledge the company can't afford to fall behind on apps and have been crisscrossing the globe over the past several months trying to convince application developers to support the new operating system, called BlackBerry 10. They've also been helping developers modify apps built for the Android operating system so they can be used on BlackBerrys. Last September, RIM said top applications such as Facebook, Twitter, LinkedIn and Foursquare will be available for its new phones. But it is unclear whether other popular offerings such as Netflix, Instagram and Skype will be available among the 70,000 apps it has lined up. That's a lot of apps, but it is well behind the 800,000 available in Apple's App Store. And for many companies, there is little incentive to spend the money or manpower building and maintaining apps for an as-yet unproven platform. Facebook Inc. opted not to build its own app for BlackBerry, so RIM is handling it itself with help from the social networking giant. "We worked closely with RIM so that Facebook BlackBerry 10 users will have a good Facebook experience," Facebook spokesman Jonny Thaw said. —Thomas Gryta contributed to this article. Write to Spencer E. Ante at spencer.ante@wsj.com and Will Connors at william.connors@wsj.com A version of this article appeared January 30, 2013, on page B7 in the U.S. edition of The Wall Street Journal, with the headline: RIM Looks Outside to Help Sell New Devices. via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHVhX3f78f3FNpL9p8NLwNmhG5D3A&url=http://online.wsj.com/article/SB10001424127887323644904578272361048671352.html

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