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Who wants to squash the BlackBerry?

Smart phone competitors are lining up, and the top weapon in their arsenal is software for heavyweight Microsoft. But Research In Motion's CEO doesn't seem fazed

Globe and Mail Update

Imitation is the highest form of flattery, and when you're the market leader, everyone wants to be just like you. That's both good news and bad news for Research In Motion Inc., creator of the world's first and most famous smart phone, the BlackBerry.

With 10.5 million subscribers and second-quarter revenue of $1.37 billion, RIM is king in the land of smart phones. Even the arrival of Apple's much-hyped iPhone, with its user-friendly interface, cool looks, music and video players, and simple e-mail program didn't faze RIM. As the company's co-CEO, Jim Balsillie, says, RIM still increased its market share by 10% in the quarter. It topped that two weeks later with a deal to sell BlackBerrys in China, pushing its stock up an additional 8%, more than doubling the price in a year. (It even surpassed Royal Bank as the largest company on the TSX by market cap in mid-October.)

As the undisputed leader in the market, RIM is a target. Competitors not only want to emulate its success but steal the crown—though RIM's straight-talking CEO shrugs off the notion that interlopers are about to home in on his turf. "Hey, users are the winners because they benefit from the innovation," shrugs Balsillie. "It's a fact of life. We just accept it. We thrive by sticking to our knitting."

The imitation factor, though, is growing. A plethora of phones is flooding the market at all price levels. Most are based on the Windows Mobile 6 (WM6) operating system, though some, like the Nokia E62, run the Symbian operating system from the Nokia-LG-Sony Ericsson consortium (it's dominant in Europe but hasn't established a foothold in North America). RIM, meanwhile, runs on its own proprietary operating system.

On the outside, the new Motorola Q 9h, Hewlett-Packard Mobile Business Messenger 900, Palm Treo 750 (and, not-yet-in-Canada, Treo 500v), and HTC's 621 and 640 all have that oh-so-familiar BlackBerry feel, heft and screen size, complete with QWERTY keyboards. Inside, they have mobile Outlook and Microsoft Office suites that synchronize with their PC siblings. And, like the BlackBerry, both Symbian and WM6 have thousands of add-on applications available.

Aside from the obvious phone functions, plus texting in either e-mail or SMS form, these smart phones also double as still and video cameras, music players and, increasingly, as navigation guides, with GPS options making them the go-anywhere, do-anything, must-have devices from the boardroom to the service truck.

New niches are also opening up: Psion Teklogix of Mississauga, Ontario, has just launched a rugged smart phone designed to be used in hard outdoor environments such as loading docks and construction sites. "We were starting to feel the heat," says Herb Turzer, Psion Teklogix's senior product manager. "Smart phones were encroaching and butting into our traditional applications, so we came to market with a device to counter that which has a few advantages over a standard phone."

With more than 650 million e-mail addresses out there and fewer than 20 million of them mobilized on smart phones, handset makers and carriers see growth all around. "We know that the global market for mobile e-mail boxes has doubled from 15 million in 2005 to 30 million in 2006, and it's projected to double again to 60 million and then 120 million the year after," says Gene Wang, vice-president of HP's handheld division. "What we have now is a fraction of the potential mobile e-mail boxes in the world."

Wireless carriers and consumers alike are anxious to ride that wave. So what's the problem? In a word, price.

Here in Canada, sending and receiving e-mail or surfing the Web on a smart phone is still too expensive and North American sales numbers are reflective of that—features like e-mail and web browsing remain the purview of employees working at private and public institutions. York Region, north of Toronto, for example, spends one-third of its $3-million telecommunications budget on mobiles.

There is some indication, though, that things may change. Canada's Big Three carriers—Rogers Wireless, Bell Mobility and Telus—say they're meeting customer demand with their pricing. But Telus has broken from the pack with a rate of $100 for 1 GB of data per month, effectively offering four times more data transfer for the same price. The others haven't followed—yet. But, U.S. carriers are also starting to offer more friendly data plans and seeing a jump in smart-phone sales.

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