The Apps Battle Heats Up

Research in Motion will soon launch an online store to rival Apple's, with Nokia and Microsoft to follow

By Reena Jana and Peter Burrows

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RIM co-CEO Lazaridis is set to open App World on Apr. 1. Norm Betts/Bloomberg News

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Gary Neill

On Apr. 1, Mike Lazaridis, co-CEO of Research in Motion (RIMM), is expected to take the stage at the wireless industry's annual trade show in Las Vegas and open the virtual doors to a much anticipated new online store. BlackBerry App World will be chock-full of software programs created by outside developers that visitors will be able to download to their RIM phones.

It's the first of several major assaults by rivals on Apple (AAPL)'s fast-­growing iPhone business. Apple has stoked demand for the device by offering thousands of software applications from independent developers through its App Store. Now, Nokia (NOK), Microsoft (MSFT), and Palm (PALM) plan to follow RIM with virtual software stores of their own this year. "There's going to be a significant counter-­challenge to Apple," says Mike McGuire, analyst with researcher Gartner (IT).

Nokia, RIM, and others sell more phones than Apple. But Apple has leapt out to an early lead in transforming the mobile phone into a sophisticated computing device onto which people load their favorite software. The number of mobile phones that can browse the Web and handle other advanced tasks is expected to surge from 139 million last year to 295 million in 2010, according to Gartner. These so-called smartphones are on track to eclipse the 300 million-unit ­personal computer market. "This could make the PC wars of the 1980s look like small potatoes," says Trip Hawkins, chief executive of mobile game maker Digital Chocolate.

RIM may seem an unlikely contender in this fight. Its BlackBerry is often dismissed as the utilitarian, slightly boring alternative to the stylish iPhone. But RIM is taking aim at the one clear weakness in Apple's approach—the paltry profits for developers who create software for the iPhone. RIM plans to make the business more lucrative for developers, to lure them away from the House that Jobs Built. "RIM's strategy is defensive," notes Anil Doradla, an analyst with William Blair. "But based on RIM's track record, I'd give them high marks."

RIM starts with a more established base in the corporate world. BlackBerry users tend to be well-off, and some will be able to charge App World software to their employers. RIM also plans to take just 20% of BlackBerry software sales, compared with Apple's 30% cut. And RIM's starting price for apps (not including freebies) is $2.99, vs. Apple's 99¢. "Obviously, more is better for us," says Robert Kao, a New Jersey software developer who plans to sell his $9.99 e-mail application on App World.

RIM is no newbie in software. The company has been working with developers since 2002 to create applications for the BlackBerry. During that time, developers downloaded more than 100,000 kits to write code for such products as Intuit (INTU)'s QuickBooks budgeting software and Tarascon Primary Care Pocketbook, a clinical reference guide for physicians. Until the app store's opening, however, the BlackBerry programs have been scattered across the Web, rather than collected in one central site. "This is not new for us," says Lazaridis.