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For BlackBerry, a Crop of Rivals

By Cliff Edwards The battle for your in-box is intensifying. Consumers may not think mobile e-mail is as sexy as text messaging and megapixel phone cams, but wireless carriers around the world are suddenly very interested in the juicy fees from data plans.

Major e-mail service providers such as Microsoft (MSFT), Good Technology, SEVEN Networks, and Visto are seeking to unseat fast-growing Research in Motion (RIMM) as the leader of what could grow to be a multibillion-dollar market in a few years (see BW, 5/23/05, "Looking to Pick Off BlackBerry"). The rise in mobility "represents a huge shift in computing, and this market is just seeing the beginning of phenomenal growth," says Good Technology CEO Danny Shader.

BIG BLUE PLAY. The latest announcement came on July 11, when closely held Good Technology announced a deal that allows Sprint (FON) to sell its service to corporate customers as part of a package of phone and e-mail support. The Santa Clara (Calif.) company hopes to challenge RIM's BlackBerry service as the market leader for enterprise e-mail by sacrificing higher-margin first-party sales for the voluminous business that Sprint, Cingular, and other third-party carriers get from their far larger sales forces.

Good Technology's service, Shader says, is deployed to nearly half of the world's biggest companies. Good doesn't release total subscriber numbers. But it aims to extend its reach in the first half of 2006 by rolling out service that supports IBM's (IBM) Lotus Domino e-mail.

Domino is more popular in Europe than Microsoft's Exchange-based e-mail. Good purchased JP Mobile, a pioneer in wireless handheld computing, to speed its access to advanced server technologies that connect with a variety of back ends, including Domino, Shader says.

SOFT SPOT? Meantime, it may be up to federal courts to determine who'll get the lion's share of profits from mobile e-mail growth. A jury trial to settle a patent-infringement dispute filed against Seven by rival e-mail provider Visto is expected to begin as early at this week in U.S. District Court in Texas.

It's the latest in a series of legal cases whose outcomes will settle claims to key technologies needed to securely deliver e-mail to handheld devices and keep it synchronized with PCs and servers at home or in the office. RIM has been involved in a long legal battle with "virtual company" NTP over licensing rights to wireless e-mail patents filed years ago. NTP doesn't make or sell a product, but it has awarded valuable licenses to many e-mail providers.

Even though the case has weighed on its stock, RIM continues to sign up new customers, with a list that now tops 3 million. In its fiscal year ended in February, RIM reported 135% year-over-year subscriber growth, but rivals say its Achilles heel is that two-thirds of its revenue comes from sales of BlackBerry servers and devices.

RIVALS' LOGIC. Hardware companies are rushing to collaborate on software and hardware, hoping a standards-based approach will break BlackBerry's lock on the market. Nokia (NOK), for instance, has said its phones will support most e-mail productss, and it has announced deals with Microsoft and others to back up that assertion.

Samsung, PalmOne (PLMO), and Motorola (MOT) are among other handset makers betting that new Microsoft software and mobile support for Exchange 2003 Server Edition will help them build glitzier phones than RIM and more seamlessly tie service to corporate e-mail.

E-mail service providers also are courting RIM's carrier partners. RIM and Good Technology essentially provide service for a highly connected segment of the businesses they serve. But Seven, Visto, and others promise more mass-market products by handling back-end service and support for wireless carriers such as Vodafone (VOD) and Cingular, which typically rebrand e-mail delivered to a slew of different phones.

"We think there's a much bigger market opportunity for us because the carriers really don't want to promote another brand like Good or BlackBerry, particularly since the customer could get that same brand when they switch to another wireless provider," says Visto CEO Brian Bogosian.

"JUST GETTING STARTED." RIM Chairman and Co-CEO Jim Balsillie says his outfit welcomes all challengers. It has great relationships with many of the world's major carriers, he maintains, as well as strong enterprise growth because of RIM's secure solutions.

The company also is moving to make BlackBerry service available on more third-party devices in an effort to blunt any inroads by potential rivals. "With RIM, you can pick your country, the applications you want, your [wireless] protocol, or the device," Balsillie says. "Others are just getting started on that."

Balsillie may be confident, but Wall Street is less so. While 9 analysts rate the stock a buy, 10 recommend holding it, and ThinkEquity's Pablo Perez-Fernandez instructs his clients to sell. We "are fairly certain that competition will cause RIM's top and bottom growth to slow down markedly by 2007 and 2008," he wrote in a June 23 report.

ANXIOUS MOMENTS? At market close on July 11, RIM shares finished down $1, at $71.57. That's well off it's 52-week high of $102.56.

While none of RIM's competitors may yet be the "BlackBerry killer," in a few years, taken together, they may be powerful enough to push RIM aside in the minds of businesses and consumers alike. It's a threat that should be keeping RIM execs up at night. Edwards is a correspondent in BusinessWeek's Silicon Valley bureau

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