April 12 (Bloomberg) -- Research In Motion Ltd., seeking to offset plunging U.S. sales, is preparing to open stores across the Middle East as part of a push in a region where demand for its BlackBerry phones has held up better.
The company is in the final stages of negotiating a lease on a flagship store of as much as 1,500 square feet (140 square meters) in Dubai, the United Arab Emirates city-state known for its malls, said Sandeep Saihgal, managing director of RIM’s Middle East business. Stores with local partner Axiom Telecom are planned across the region, he said.
“We’re getting the first one up and running and then we’ll be looking at other cities across the Middle East -- Saudi Arabia, Kuwait, Qatar,” Saihgal said in an interview this week at RIM’s headquarters in Waterloo, Ontario, where he was visiting from his base in Dubai.
While Americans are dumping their BlackBerrys for Apple Inc.’s iPhone or Android devices, RIM is counting on first-time smartphone buyers across the Middle East, Africa and Asia to choose a BlackBerry. Helped by features like the free instant-messaging BlackBerry Messenger program, shipments in the Middle East and Africa more than doubled to 2.29 million units in the fourth quarter from a year earlier, outselling the iPhone by a margin of 4-to-1, IDC data show.
RIM’s push into retail mimics the strategy of Apple, which is relying on its own stores around the world in addition to partners to sell its products. While additional stores add sales channels, they alone won’t help RIM revive global demand -- it also needs better products, said Anil Doradla, analyst at William Blair & Co.
“Apple stores do well not because of the store experience -- which definitely is a positive -- but because they make good phones,” said Doradla, who is based in Chicago and rates RIM the equivalent of a hold. Until RIM “addresses the phone issues, they’re not going to get a lot coming out of these stores.”
RIM’s shares have slid 76 percent in the past year, while Apple almost doubled. RIM added 0.9 percent to $13.05 yesterday.
The Middle East expansion will probably be followed by Africa, with RIM planning flagship stores in markets including Nairobi, Kenya, and Lagos, Nigeria, Patrick Spence, RIM’s global head of sales, said in the interview with Saihgal.
In February, RIM said it’s planning about 4,000 outlets across Indonesia, including dedicated BlackBerry stores, store-in-stores and kiosks, a “proving ground” for potential additional locations across southeast Asia.
To cater to local tastes, RIM plans to customize the look of its Middle Eastern stores with Axiom, which bills itself as the Middle East’s largest mobile-phone distributor.
“The Middle East is different from Indonesia and what we need to do is a little bit different in terms of the experience we want to deliver,” Spence said. “We’re being very focused in terms of the countries and cities we’re doing it in, based on where the brand is and what we think we need to do.”
Spence, who has been with RIM since 1998, runs global sales from its offices in Slough, England. Once one of RIM’s strongest markets, sales in the U.K. fell 32 percent last quarter.
RIM doesn’t break out sales by country other than for the U.K., Canada, and the U.S. While sales plunged 25 percent last quarter from a year earlier, dragged down by a 57 percent drop in U.S. revenue, sales from the rest of the world including the Middle East were little changed at about $2.84 billion.
Still, RIM is set to face intensifying competition in emerging markets as low-cost Chinese manufacturers like Huawei Technologies Co. and ZTE Corp., who make handsets running Google Inc.’s Android software, concentrate their firepower on Africa and Asia. Android’s gains at the BlackBerry’s expense in the U.S. may be repeated in markets outside North America, William Blair’s Doradla said.
“The North American smartphone market has proven to be the testing lab for the success and failure of these smartphone vendors,” he said. “Whatever happens in the North American market on a delayed time basis shows up on a global basis.”
RIM is up to the challenge, Spence said.
“Android continues to come on everywhere,” said Spence, who was formerly based in Asia. “Even with the influx, especially at Christmastime, of a lot of really cheap products in the Middle East, in Africa, in Europe, we’ve held our own.”
The slump in markets such as the U.S. drove RIM’s global market share to 8.8 percent in the fourth quarter from 15 percent a year earlier, according to Gartner Inc. Android jumped to 51 percent from 31 percent and Apple climbed to 24 percent from 16 percent.
Thorsten Heins, RIM’s new chief executive officer, said last month that the company will refocus on the corporate market, where it has lost market share, and concentrate on “targeted” consumer markets.
That led to the wrong impression that RIM was retreating from some markets or regions, Spence said. Rather, it means RIM isn’t trying to match every rival device, he said.
RIM has said it plans to debut the first phone on its new BlackBerry 10 platform in the “latter” part of this year. Spence wouldn’t elaborate on when that would be, adding only that RIM learned from past mistakes that it’s critical to get the phone as good as it can be rather than rushing it out.
“We’ve got to make sure we deliver more than we have in the past,” Spence said.
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