BlackBerry vs. iPhone: Who wins?

Design features and target audiences begin to blur as Research In Motion and Apple fight for market share.
By BusinessWeek

Consider it a battle less for hearts and minds than for thumbs and ears. That's what may ensue between Apple (AAPL, news, msgs) and Research In Motion (RIMM, news, msgs), judging from recent Wall Street analyses and the performance of the companies' shares and marquee products.

Apple is expected to sell 10 million iPhones by the end of 2008. Meanwhile, Research In Motion has 12 million subscribers, and its iconic BlackBerry is selling at a clip of about 4 million units a quarter.

Shares in Apple have been trading near a record $200, while Research In Motion reached a split-adjusted record of $137 a share in November.

Target markets for the iPhone and BlackBerry are starting to overlap as well. The iPhone is a media consumer's dream, playing movies and music with ease. But it's not as finely tuned for the corporate user; large companies have resisted letting employees use iPhones on corporate networks, and information-technology consultant Gartner has advised its corporate clients to avoid the iPhone for now.

Still, analysts speculate that Apple is working on a corporate-friendly version of its e-mail software or that Apple will announce it's working with a third party to handle the job.

Meanwhile, BlackBerrys are taking on more iPhone-like trappings all the time.

The BlackBerry has long been the staple of corporate users who focused mostly on e-mail and calendar features, but Research In Motion has recently been aiming for high-end consumers who might buy the device for play as much as for work.

BlackBerrys now boast cameras that shoot both still and video images. They also play music.
Now, Research In Motion is rumored by analysts and gadget blogs to be working on a new device, the BlackBerry 9000, that sports a touch-sensitive screen –- making it look an awful lot like an iPhone. The company declines to comment on future products.

So are Apple and Research In Motion on a collision course? Opinions vary.

Scrapping over the same customers
Blogger Henry Blodget of Silicon Alley Insider has argued that war between the two tech titans is already under way. Research In Motion still sells most of its devices to corporate users, although in the most recent quarter about 1.3 million units, or 34% of the total, went to what the company calls "non-enterprise" customers -- small businesses or consumers buying BlackBerrys for themselves.

That alone amounts to more BlackBerrys than the 1.1 million iPhones Apple sold in the same period. Like it or not, Blodget says, the companies are scrapping over the same customers.

Other analysts see it differently.

They see the battle as less iPhone vs. BlackBerry and more of a contest pitting Apple and Research In Motion against established phone vendors like Nokia (NOK, news, msgs), Samsung and Motorola (MOT, news, msgs).

Smart phones, which combine such features as e-mail, navigation and Web access, will grab an ever-growing slice of the billion-unit-plus handset market in 2008. "I don't think Apple and RIM are heading for a showdown in 2008," says Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Ore. "I think the market for smart phones is growing fast enough, and smart-phone adoption is low enough, so far that both will be huge share gainers. Apple and RIM are two companies that get it right now, and they're both going to do well."

In a research note published Dec. 21, after Research In Motion's most recent earnings report, Bear Stearns analyst Andy Neff wrote: "The battle is not RIM vs. Apple, but smart phones versus conventional handsets."

If that's the case, Motorola will need to watch its back.

Having tied its smart-phone strategy to Microsoft (MSFT, news, msgs) with its Q phone line, Motorola hasn't generated much traction, while the popularity of its once red-hot Razr line of conventional handsets has cooled. (Microsoft owns and publishes MSN Money.) Once No. 2 in the world handset market behind Nokia, Motorola has recently slipped into third place behind Samsung.

Nokia is getting ready for the fight, too. In December the company announced a tie-in with Universal Music Group that will put a music-download service on many high-end Nokia phones.
Other labels, eager for negotiating leverage against Apple, which operates the hugely popular iTunes Store, are expected to follow suit.

Handset makers will get an assist in any battle with Apple and Research In Motion from Android, Google's (GOOG, news, msgs) free smart-phone operating system. Long thought to have been working on a phone of its own, Google instead said it's creating operating-system software that it will share, for free, with mobile-phone vendors.

The first handsets to use Android aren't expected to ship before the second half of the year. That means Apple and Research In Motion, both with high-profile device launches planned for roughly the same time, will have to share the stage with Google and its many hardware partners, which include Motorola, LG Electronics and HTC.

So whether the main competition is between Apple and Research In Motion or more generally between smart phones and traditional cell phones, consumers -- and their thumbs and ears -- will take note.

This article was reported and written by Arik Hesseldahl for BusinessWeek.