updated 02:25 pm EDT, Wed April 9, 2008
Needham on RIM and Palm
Both Palm and the BlackBerry's creator, Research in Motion, are likely to feel a continued squeeze on their bottom lines as a result of the iPhone, according to separate investment notes from Needham & Co. The financial researchers note that both smartphone producers are most likely to feel added pressure because of the emergence of the consumer smartphone market, which doesn't share the same values as the business market. Services such as near-instant "push" e-mail are only a small factor for most home users, according to analyst Charlie Wolf. While that feature has helped the BlackBerry cement its position in the workplace, most home users are equally concerned with media playback as well as web access.
RIM is not in any short-term danger and is likely to win out over most rivals in the US because of smartphones that appeal to both consumers and businesses, like the Pearl series. However, the company's frontrunner status in the US is known to have dropped from 45 percent to 35 percent in the last quarter of 2007 primarily because of the iPhone, which targets RIM's relative weak point. While the BlackBerry is relatively strong, says Wolf, RIM's success comes more from weakness in others.
The blame is particularly laid at the feet of Windows Mobile, which Wolf says has soured otherwise capable devices. Handsets like HTC's Touch or Samsung's BlackJack series have often been functional from a hardware perspective but are claimed to be unnecessarily difficult in software through the use of Microsoft's mobile OS, which few seek outside of business.
"[The company]'s competitors until quite recently were simply inept," the Needham analyst writes. "Their failure stemmed less from their ability to design sleek phones than in their choice of an operating system on which to run them."
The iPhone is one of the few legitimate contenders to RIM since its iPhone emphasizes ease of use and strong software, the Needham report says, especially for media, web browsing and other areas that have been historically neglected by virtually every other smartphone maker. Wolf warns that RIM's apparent security could be undermined by the June launch of Apple's new phone firmware and support for third-party apps, which will provide another viable alternative both for "push" e-mail as well as third-party apps.
Palm, by contrast, doesn't have the advantage of either a clearly strong device or a matching operating system. The company is only now clearing up mistakes made in neglecting its own Palm OS with a Linux-based replacement due by late 2008 or early 2009, and currently licenses Windows Mobile for some of its professional devices. The inexpensive Centro is likely to sell well among consumers but is only described as a "cushion" to soften the blow for Palm until new phones and software are available. Without these, Palm is unlikely to reverse a trend of either flat or declining marketshare hastened along by the iPhone, according to the report.
The Treo designer, and to a lesser extent RIM, are also expected to feel added pressure from phones based on Google's Android platform, which is due to appear in late 2008 on phones made by companies that have previously used Windows Mobile for many of their handsets.