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OCTOBER 18, 2004
Blackberry's European Assault Wireless gadget maker Research in Motion is determined to win over the Continent Few companies as small as Research In Motion Ltd. (RIMM ) could ever dream of achieving its cachet. The Waterloo (Ont.) maker of the popular BlackBerry pager has gained a cult following among traveling executives, investment bankers, and lawyers hooked on sending and receiving e-mail wirelessly. Their addiction is such that some have dubbed the device -- which sells for about $400, plus $20 or so per month in service charges -- the "crack-berry." That explains why RIM, which counts 1.7 million users and made profits of $235.2 million on revenues of $944.3 million in its four most recent quarters, boasts a dizzying market capitalization of nearly $12 billion -- more than AT&T (T ) or Electronic Data Systems (EDS ). Now, RIM is moving to expand its global footprint. Five years after the first BlackBerry came out, 82% of users are still in North America. That's why the company is turning up the volume in Europe, where it has fewer than 300,000 customers. RIM has already signed deals with most of the major mobile operators, including Vodafone Group PLC (VOD ) and Orange, to sell BlackBerrys and provide e-mail forwarding over their networks. And in a few weeks, RIM will debut a new version of its e-mail server that will handle non-Latin alphabets such as Cyrillic, Arabic, and Chinese. "The opportunity outside North America could be as big, if not bigger," says Robert W. Stone, an analyst with SG Cowen & Co. NO SWEAT -- YET RIM has to move fast because competition is heating up. Smaller American rivals such as Good Technology Inc. and Visto Inc. are also moving into Europe -- and their cheaper e-mail forwarding services work on a broad array of devices, such as Palm organizers, mobile phones, and Windows-based handhelds. Visto already has signed up with Dutch telco KPN and expects to announce major deals in Britain and elsewhere within the next few months. To woo the phone companies, RIM's competitors take a smaller cut from the fees carriers earn by relaying e-mail messages to wireless devices. Even RIM's partners are playing the field. PalmOne Inc. (PLMO ), maker of the Palm handheld organizers and the Treo phone-PDA hybrid, signed on to include BlackBerry technology in its products in 2003. But on Oct. 5 it announced a deal with Microsoft Corp. (MSFT ) to collaborate on technology that will synchronize e-mail from Microsoft mail servers to wireless Palm devices. "You can bet your bottom dollar that Microsoft aims to recapture the wireless e-mail business from RIM," says Ben Wood, mobile analyst for market researcher Gartner Inc. (IT ) near London. So far, RIM isn't breaking a sweat. To cement its status as the de facto standard for connecting corporate e-mail systems to wireless devices, it is rolling out new products. In September it unveiled a radically new gizmo, called the 7100, that looks more like a mobile handset than the traditional sandwich-shaped BlackBerry. The 7100, which also works as a phone, should appeal to customers who want a single device for calls and e-mail. RIM is also moving to pump up its user base by licensing the core BlackBerry technology to handset makers such as Nokia Corp. (NOK ) and SonyEricsson Group, who build it into their phones. "The market is much bigger than we can address ourselves," says Larry Conlee, RIM's chief operating officer. RIM profits from licensing because it makes one-fifth of its revenues from service fees to connect corporate e-mail systems to wireless devices -- no matter whose they are. RIM is gunning for 2 million users by the end of this year -- double the number last February. SG Cowen's Stone figures the company's revenues will hit $1.37 billion in the fiscal year ending February, 2006, thanks in part to strong growth outside America. That's based just on estimates of BlackBerry sales. Add in sales of servers to support potentially millions of users of BlackBerry-enabled mobile phones and the service fees they pay, and RIM starts to look like it might even merit its big market cap.  By Andy Reinhardt in Paris
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