[Red Herring] Blackberry picked to be the American I-mode

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From: Linda (joelinda1@home.com)
Date: Tue Dec 05 2000 - 23:05:24 PST

[Nice press for RIMM shareholders. Also of note: today marks the
greatest percentage and point gains in Nasdaq history, closing
up 10.48%.



Blackberry picked to be the American I-mode
By Om Malik
Redherring.com, December 05, 2000

Michael Dell has one, Marc Andreessen does not leave home without
it, and it is a must-have accessory for every Wall Street investment
banker. It's not the American Express Platinum Card; it's a lowly
two-way pager, which also sends and receives email.

The esoterically named Blackberry -- a cross between a personal
digital assistant, wireless email device, and pager manufactured by
Research in Motion (Nasdaq: RIMM) -- is one of the hottest devices
in North America, with more than 200,000 sold, mostly to on-the-go
corporate types. And those sales have happened primarily through
word of mouth, a marketing coup that might be considered the hardware
equivalent of Napster's success.

At a recent Churchill Club gathering in Santa Clara, California,
Kleiner Perkins Caufield & Byers partner John Doerr -- arguably the
second-most powerful man in technology, behind Bill Gates -- described
the Blackberry as "the I-mode of North America." (I-mode is the
popular wireless service from Japan's NTT DoCoMo; with handsets that
resemble the smallest American cell phones, I-mode devices are the
most common method of accessing the Internet in Japan.)

Mr. Doerr was pretty much on the mark. Soon, with America Online
(NYSE: AOL) and Yahoo (Nasdaq: YHOO) pushing the consumer version of
the device into the market, the Blackberry is likely to become a
household name. Last week, AOL said it will use Research in Motion's
hardware and customize it as the AOL Mobile Communicator series of
handhelds. AOL subscribers can purchase the device for $329.95 and
pay a monthly $19.95 subscription fee to access the wireless service.
Given AOL's reach, that could add a few hundred thousand Blackberry
devices into the market. PC makers Compaq Computer (NYSE: CPQ) and
Dell Computer (Nasdaq: DELL) have signed up to push the device to
their customers for a piece of the action.

For Jim Balsillie, chairman and co-CEO of Research in Motion (RIM),
these are the salad days. For nearly 12 years, the Waterloo,
Ontario-based company has struggled in anonymity, hoping that one day
it would become the darling of the Silicon Valley crowd.

His wish has been granted. RIM stock has been on fire for much the year
-- rising 44.6 percent, giving the company a market capitalization of
about $5.3 billion.

COMPETITION HEATS UP The Blackberry created a market that everyone else
is chasing. Motorola (NYSE: MOT) is hoping for similar success for its
new Timeport pagers. But even its neon colors, lower price, and
Hollywood push (MTV veejay Carson Daly is a pitchman for the product)
may not be enough for Motorola to combat its Canadian rival. Palm
(Nasdaq: PALM) and Handspring (Nasdaq: HAND) are also adding such
features to their products, but RIM has a nice head start.

Looking to expand quickly, the company has just expanded into Europe.
BT Cellnet, a subsidiary of British Telecommunications, is going to
sell the device in England and Europe. All this expansion is, of
course, going to take a big bite out of the company's profits.

While sales are expected to rise to $189.3 million in fiscal 2001
(ending February 28, 2001) from $85 million in fiscal 2000, RIM will
report a loss of $9.7 million for fiscal 2001 versus $10.1 million in
net income in fiscal 2000, according to Merrill Lynch estimates.
Merrill analyst William Crawford predicts that by fiscal 2002 RIM will
be in the black again, posting a net income of $9.5 million on sales
of $344.4 million.

Red Herring recently caught up with Mr. Balsillie and talked about the
future of RIM and the viral marketing of the Blackberry pager.

Q. Can you explain what makes Blackberry so hot?

A. There are two reasons why Blackberry has become so popular. First
of all it, is always on and always connected, so you can get your
email anytime, all the time. Secondly, it is an extension of your
desktop. Everyone else wants you to have another email address, while
Blackberry does not require [it].

Q. Why are you simply focusing on the hardware device and not offering
services on top of your platform?

A. Part of our value-add is that we do not contend or compete with the
existing player. If it is an Internet service provider (like AOL) or a
portal (like Yahoo) we simply extend their platform. We do one thing
-- the hardware -- and we do it very well. I think the embedded
antenna, long battery life, and ease of use are because of our focus.

JAVA IS KEY Q. So what are the new applications currently under
development that will give more oomph to the Blackberry?

A. Since we use a Java virtual machine at the core, half a million
Java developers can develop applications for Blackberry quite easily.
More than 10,000 of our software development kits have been downloaded
so far. So you will see people like Aether Systems (Nasdaq: AETH)
and ETrade (Nasdaq: EGRP) develop stock-trading applications. Others
are developing a personal wallet for the device. Of course, Yahoo
and America Online are offering their own services (such as instant

Q. Java seems to be the key here.

A. The developers do not know what environment to write for, and
they are confused. I think that is why a lot of wireless devices
are embracing Java, so that developers can write applications which
can run anywhere. We were the first, and now other wireless devices
are doing the same.

Q. You must be coming under a lot of competition, especially since
Palm and Handspring have started offering their own wireless services
and are working with the wireless ISP Omnisky (Nasdaq: OMNY). And they
seem to be cheaper.

A. I think the comparison is unfair, because we are a personal
information manager, wireless email device, and pager all rolled
into one device for $399. Now if you took the others and added the
cost of a modem, their solution is more expensive than us.

Q. What about Motorola, which has new two-way pager-wireless devices
on the market that are being touted by Hollywood celebrities?

A. Motorola is selling a pager, a very simple device, which runs
on a legacy network and has limited functionality.

Q. What's next for RIM?

A. I think with the America Online and Yahoo thing, the consumer
push is a huge area. Secondly, we are about to start integrating
with Lotus Notes. These are two major developments for us, and of
course there is the expansion into Europe.


"AOL on a phone? Be still, my racing heart."
  --David Haskin, Managing Editor, allNetDevices

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