RIM vs. Apple: Should Cisco Buy RIM?

Rob Enderle

Research in Motion (RIM) launched new phones today and my initial impression was, "So what?"

 

The market typically only cares about two platforms, rarely three and almost never more than that. However, recent Comscore results in North America indicate that Apple lost a little share last year, Microsoft lost a lot, and while Google gained what Microsoft and Palm lost, it still has less than half of what Microsoft had last year.

 

RIM gained a little and has close to half of the overall market. RIM still has a substantial focus on business and this release puts it in the lead for creating a virtual PBX out of the cell phone players.

 

Based on these numbers, the fact that businesses pay for most smartphones in North America, and this latest release, you could argue that RIM is winning. Or you could argue that Apple appears to be. That's the power of marketing. But perceptions can lead reality if enough people act on those perceptions. Fortunately for RIM, Apple doesn't "get" business; unfortunately, that's eventually likely to change.

 

The Power of Marketing


Apple is the only company whose smartphones have customers lining up to buy them, the only one hounded by folks trying to get a scoop on its next phone product, and the only one really being chased by every other phone company, including RIM. The iPhone was preceded by similar phones, such as the LG Prada, which didn't sell well, and it is a running joke that as amazing as the iPhone is, the design isn't optimal as a phone. None of that matters.

 

Apple learned early on that it's not the best product that necessarily wins, but the product people want the most, and the two things don't have to be that closely coupled. Even quality isn't an absolute and is heavily based on perceptions, which good marketing effectively manipulates.

 

Apple's strategy of building good products and driving people to them has worked amazingly well for the past decade. However, the fact that the company didn't gain share, while both Google and RIM did, would indicate there's probably a gap between what it's selling and most people want.

 

RIM: The Power of Focus

For the most part, RIM is focused on the smartphone segment that can afford the expensive data fees. Without the help of their employer, most individuals simply can't afford the $60 to $120 per month data charges. You see, the phone price isn't the problem; it is the price of connecting to the network. In addition, companies like to bid providers against each other, and RIM is on multiple cellular providers. This gives it access to more business buyers.

 

In addition, while RIM, with limited success, has focused more on consumers in its hardware design, it has largely remained heavily focused on businesses with its features and capabilities. RIM tends to lead in battery life and security and has a heavy portfolio of management products. Its recent announcement takes the company close to offering a virtual PBX in which RIM users could more easily connect to a current-generation VoIP PBX or a cloud-based virtual PBX seamlessly and abandon their soon-to-be-obsolete desk phone.

 

Office features include dial-by-extension, hold, least-cost (optimized) routing, voice policies and select-line capabilities. This list increasingly looks like a list of basic PBX features on a system designed for business. But if RIM is going to challenge the PBX market, it desperately needs a PBX partner.

 

Why RIM Will Likely Lose

The way to measure the success of a business long term isn't by market share or even market focus, but by financial results. Right now, Apple leads the technology industry in most critical metrics. RIM isn't even in the same league. Regardless of the revenue, the smartphone market still represents a small fraction of phones sold and likely won't go truly vertical until data rates drop significantly around 2013. At that point, Apple will be in better shape than RIM, due to its perceived dominance and focus on the market that is likely to explode. We also have other players, such as Microsoft and Google, who both are better-funded and have stronger partners then RIM does. Apple, Google, Microsoft, and even Nokia -- but who knows for how much longer -- can go toe-to-toe as the market matures, but RIM simply doesn't have the resources and is unlikely to grow big enough naturally.

 

This isn't to say it will be going away, but if RIM is trivialized today even though it is dominant, when the market explodes, it likely will become insignificant unless it can grow to a size that can go the distance with these larger players.

 

Wrapping Up

Companies that lead at the beginning of a market -- and this has been a long beginning -- seldom lead at the end and have to scale up to survive maturation of a market. Apple eventually scaled up enough for the PC market. Commodore, which initially led, didn't win out. Even mighty IBM exited because it couldn't compete once the PC market matured. RIM has a few years yet to get to the size it needs to be, but the clock is ticking. Maybe it's time for RIM to be acquired by a company like Cisco that can go the distance.

 

A Cisco/RIM merger would position both companies better for the wireless phone battles to come. Cisco is one of the few companies that does mergers well and has one of the leading VoIP telephone solutions on the market. The two together would be formidable, and they may already be talking.



Add Comment      Leave a comment on this blog post
Apr 30, 2010 2:52 AM Tim Sylvester Tim Sylvester  says:

In a word - YES! RIM is a perfect acquisition for Cisco. RIM is the leading vendor in a narrowly defined market - smartphones for the enterprise - and can leverage Cisco's VoIP product line and Cisco's enterprise sales force. As mentioned, RIM has relationships with all the carriers and a grow market share in the consumer space.

I've had both an iPhone and a Blackberry. The Blackberry is a much better phone for business/enterprise customers - especially the real keyboard for e-mail and the integration with Microsoft Exchange.

Finally, a Cisco acquisition of RIM would turn the HP acquisition of Palm into a joke.

Tim

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