Until last month few people outside Silicon Valley had heard of Visto Corp. But then the tiny, privately held company in Redwood Shores, Calif., announced that Britain's Vodafone Group PLC (VOD) had agreed to roll out Visto's wireless e-mail technology in 10 countries, including France and Italy. A few days later, Canadian wireless carrier Rogers Communications Inc. (RG) struck a licensing agreement with Visto.
Now, Visto is breaking into the U.S. market. The nine-year-old company has reached a pact to license its software to Nextel Communications Inc. (NXTL), in a deal slated to be announced later this month. Nextel, which concentrates on corporate customers, is merging with Sprint Corp. (FON), creating the No. 3 U.S. wireless player.
The deal puts Visto in the middle of a battle for the hot wireless e-mail market. Research In Motion Ltd. (RIMM) (RIM) created the market in 1999 with its BlackBerry e-mail device and still dominates, with 3 million users. PalmOne Inc. (PLMO) is a strong second. As sales grow, rivals from Microsoft (MSFT) to upstarts Intellisync (SYNC) and SEVEN Networks are charging in.
Wireless carriers are cheering on the free-for-all. They see a big opportunity in making e-mail a mass market service and don't want to be limited to the selection of devices RIM offers. "We're looking for a way to offer the same service to people not comfortable with BlackBerry," says Bob Ewald, senior director of core data services at Nextel. In addition, some carriers have felt burned by the hefty fees RIM charges and want more competition to drive down prices. "They've been acting like a monopoly," says an exec at one wireless company. Nextel and other operators will continue to offer RIM's beloved BlackBerry, alongside other services.
STRESS ON SOFTWARE
Newcomers are imitating the basic idea behind RIM's success. Rather than just forward e-mail to a mobile device, these technologies let people manage their e-mail just as if they were at their desk. Zap a message on your phone, and it's deleted on your computer, too.
But there are big differences. RIM made its name supplying companies with everything they needed to provide wireless e-mail, from the software for handling e-mail to the BlackBerrys themselves. Microsoft, Visto, and others concentrate on software to handle wireless e-mail, letting companies like Nokia (NOK) and Motorola (MOT) make the gadgets themselves.
That diversity of devices is one reason for Visto's recent wins. Another: It's cheaper. Brian A. Bogosian, Visto's CEO, says the company charges carriers less than RIM, though he won't specify pricing. Ewald says Visto's service will cost subscribers $15 to $30 a month, compared with $30 to $50 for Nextel's BlackBerry.
RIM recognizes the competition. It has started licensing its software so mobile-phone makers can make their own BlackBerry-powered devices which began to hit the market last year. Still, RIM plays down the risk to its profitability. James L. Balsillie, chairman and co-CEO, says that customers who use RIM devices pay a total of $120 to $130 a month to wireless operators. RIM may collect $8 to $10 of that from the operator, but Balsillie argues that's a nominal fee. "We're making them great money," he says. "Visto and Intellisync might be a buck cheaper, but it's nothing material."
Bogosian hopes it is. He's looking to cut more deals like the one with Nextel and boost Visto's users to 1 million by yearend. Next year, he expects to turn profitable and take the company public. A sure thing? Hardly. But the benefits of competition for wireless customers certainly are.
By Steve Rosenbush, with Heather Green, in New York