Blackberry's Quest: Fend Off the iPhone

There's a reason that R.I.M. is averse to the iPhone’s glass pad. “I couldn’t type on it and I still can’t type on it, and a lot of my friends can’t type on it,” says Mike Lazaridis, R.I.M.’s co-chief executive and technological visionary. “It’s hard to type on a piece of glass.”

Mr. Lazaridis thinks that e-mail-dependent BlackBerry owners demand the reliability and tactile feedback of a keyboard. But, despite his critique of the iPhone, he does not dismiss the possibility that R.I.M. may itself one day sell a touch-screen phone, aimed specifically at consumers without the e-mail demands of BlackBerry’s core users.

Indeed, two independent developers writing software for coming R.I.M. devices say that a touch-screen BlackBerry is in the works, and that R.I.M. engineers privately refer to it as the A.K. — for “Apple Killer.”

R.I.M. would not comment on future devices or media reports last week that at least one carrier, AT&T, was delaying its introduction of the newest R.I.M. phone because of problems with call quality. Those reports sent R.I.M.’s stock down nearly 3 percent in trading on Friday.

Mr. Lazaridis says only that “I wouldn’t underestimate the amount of research we’ve done on user interfaces and technologies. We are not afraid to reinvent ourselves.”

Keypads and touch screens aside, R.I.M. is facing a lot of competitors in addition to Apple in the booming smartphone market.

For years, Microsoft has tried to have manufacturers use its operating system for smartphones, Windows Mobile, which analysts generally think is overly complex and too difficult for consumers. The companies that license it, including Motorola, Palm and HTC, a Taiwanese manufacturer, have carved out only small fractions of the overall smartphone market.

Then there is Google. Later this year, phone manufacturers have promised to start selling smartphones running Android, Google software based on the open-source operating system Linux and backed by a coalition of 34 wireless-industry companies. Google’s idea is that Android can be a more open and a less expensive alternative to the proprietary mobile technologies of Apple, Microsoft, R.I.M. and Nokia in Europe.

Executives in Waterloo acknowledge these assaults but argue that R.I.M. is the only company that isn’t trying to leverage strengths in ancillary markets, and can therefore focus exclusively on mobile-phone innovation. They also seem to relish the prospect of savvy high-technology companies jockeying for position on their home turf.

“There’s no question the level of focus and intensity on wireless platforms has gone up an order of magnitude,” says Jim Balsillie, R.I.M.’s wiry, jargon-slinging co-chief executive and strategic brain. “The stakes are so very high, not only in the size of the market and market share, but in who has the important position in the ecosystem.”

Mr. Balsillie thinks that R.I.M. is in the best tactical position for the coming fight. He points to its close relationships with 350 carriers around the world — like Verizon and AT&T — that sell, often at steep discounts, BlackBerry phones and the accompanying monthly e-mail service.

Apple and Google, on the other hand, are vocally trying to dislodge the carriers from the nexus of the North American wireless market. Unlike other phone makers in the United States, Apple sells iPhones from its own stores and has negotiated relatively stingy contracts with the carriers, in exchange for limited periods of exclusivity. Google, for its part, unsuccessfully bid for wireless spectrum this year in an effort to force carriers to be more open to allowing various handsets and Internet services on their networks.

R.I.M. makes its alliances clear. “We are sort of polite and amiable and we gently interrelate with the carriers and try to find compatibility,” Mr. Balsillie said. “It may be a better strategy to fight the carrier. We may be wrong. The carrier may get disintermediated, in which case we fade with them.”

R.I.M. is also betting on security, which hinges on the fact that its handsets and e-mail systems are relatively impervious to hackers. Mr. Lazaridis predicts that corporations will not give iPhones to their workers because they have already proved vulnerable to hackers eager to pry iPhones off AT&T’s system and make them work on other wireless networks.

“It’s not that simple for an I.T. manager to give up security,” he said.

Indeed, R.I.M.’s allure to carriers and corporations may be irresistible and impossible for Apple to weaken, even if Apple improves iPhone security. But some analysts still wonder what will happen to the BlackBerry’s dominance when everyday consumers start driving growth in the smartphone market.

R.I.M. has always moved deliberately in embracing new handset technologies, in order to reassure corporations anxious about possible security breaches. For example, it added digital cameras and slots for removable memory cards to its phones only at the end of 2006, years after they became popular in other devices. Companies feared that these features would leave confidential corporate data vulnerable, but consumers demanded them and R.I.M. ended up providing them.

Consumers also want to choose from a growing pool of entertaining software programs to buy and load onto their devices. On this front, R.I.M. may be falling behind. Apple released a set of programming tools for outside developers in March, and recently said that 200,000 programmers had downloaded the tools.

The BlackBerry has been open to developers since R.I.M. started using the Java programming language in 2001. But for now, those programs are simpler and more primitive than what’s coming on the iPhone. For example, some of the new software available for the iPhone will take advantage of its support for 3-D graphics and innovative features like its motion sensor, which allows users to rotate their screens. The BlackBerry does not support 3-D graphics; it also doesn’t have a motion sensor. If motion-sensitive gaming — like that found on Nintendo’s popular Wii console — finds a home on smartphones, R.I.M. may be at a disadvantage.

Analysts say that R.I.M.’s greatest challenge in a consumer-driven smartphone industry may simply be creating devices that people admire and covet as much as the iPhone. Despite the faithfulness of its flock, R.I.M. is not there yet.

In a survey this year of 3,600 professionals by ChangeWave, a research company, 54 percent of BlackBerry users said they were very satisfied with their devices.

Even so, the BlackBerry was a distant second in the survey: the comparable figure for the iPhone was 79 percent.