Research In Motion, the company that created the BlackBerry phones that business users find so addictive, gave Verizon exclusive rights to sell its first touch-screen phone in order to reach the vast consumer market.
But the Storm failed to live up to its name. About a million devices were sold, so it was not a flop. But many customers and some reviewers found it buggy and hard to use.
Meanwhile, the iPhone’s allure grew with new versions and a rapidly growing catalog of applications.
This week, Verizon and R.I.M. are trying again with a Storm do-over, the Storm 2. Among its many improvements, the new phone gives the user the sensation of pushing a physical button when pressing a number on the glass touch screen.
Lowell C. McAdam, the chief executive of Verizon Wireless, has been carrying the revamped device for a few weeks, looking for any evidence that this time it will catch on. Mr. McAdam said that while he was recently visiting the Verizon store in New York’s SoHo district, he started talking to a couple of students from New York University who were shopping for cellphones.
“I let them play with the second-generation Storm device,” he said. “They came back and said ‘Oh, my gosh.’ They were very excited. This is what they hoped the original Storm should be.”
If enough people share that opinion, R.I.M. could finally have the hit with consumers it has long sought. The Canadian company remains the top seller of smartphones in North America (and second to Nokia worldwide). But Apple is catching up quickly, and a huge crop of new smartphones is heading to stores based on new operating systems from Microsoft and Google. Even Verizon is hedging its smartphone bets with a major deal to develop handsets based on Google’s Android operating system.
R.I.M. has been slow to develop touch-screen technology, and its BlackBerrys are sluggish at browsing the Internet, industry analysts say. And developers have written only about 2,000 applications to run on BlackBerrys, compared with 85,000 for the iPhone and 10,000 for Android phones.
Investors are increasingly worried that R.I.M. cannot keep up with the pace of innovation. R.I.M.’s shares plunged 17 percent in one day last month after the company reported slightly less revenue than analysts expected for the quarter that ended in August.
Analysts were also alarmed because the company said the average price it expected to get from phones sold to wireless carriers would fall to $320, from $350.
“Times are getting tougher for R.I.M. as they move more into the consumer space,” said Carolina Milanesi, an analyst for the Gartner Group. “There is a lot more competition, and consumers don’t care much about the security and other things they sell to enterprises.”
Jim Balsillie, R.I.M.’s co-chief executive, said in a recent interview that investors were misreading the most recent financial results. Prices are falling largely because the company is moving out its inventory of old models in preparation for the new versions of the Storm and the Bold, its top-of-the line, keyboard-based phone.
Moreover, since R.I.M.’s component costs are falling, profit margins are holding steady. “I have never felt more enthusiastic about our business,” he said.
Despite its consumer push, much of R.I.M.’s effort is still tilted to pleasing business customers. Mr. Balsillie said the company planned to shake up the market in November when it will open its private communication network, which will allow BlackBerry users to receive their e-mail and a constant flow of social network updates and entertainment content from other sources.
“The way people love the BlackBerry, e-mail is the way they will love doing a lot more with it,” Mr. Balsillie said.
R.I.M. has been written off many times before. Skeptics said that its first gadgets, which were little more than glorified pagers with keyboards, could not survive in a world of cellphones. Instead of failing, R.I.M. was the fastest-growing company in the world from 2006 through 2008, according to calculations by Fortune magazine.
R.I.M. was not hard hit by the recession, which has forced some of the big companies that have been the heart of its market to lay off workers. And R.I.M. was helped because BlackBerrys have started to become a family phone, too.
The company has also cut the manufacturing cost of BlackBerrys by using variations on its existing designs that have allowed retailers to sell the devices at prices matching much simpler phones. For example, the BlackBerry Curve, R.I.M.’s most popular phone, is offered at Wal-Mart for about $50 with a contract. About 80 percent of R.I.M.’s sales this year have been to consumers, not to employers.
Mike Lazaridis, R.I.M’s other co-chief executive, says that the low cost of BlackBerrys allows cellular carriers to make more profit from the BlackBerrys than from other touch-screen handsets.
“We help carriers be profitable,” he said. “We gave them a way to get into the data business. Now we are giving them a way to manage their costs when they are worried that all they have to sell is highly subsidized smartphones.”
Mr. Lazaridis said that R.I.M. was about to release version 5.0 of its BlackBerry software, which promises to be easier to use, with a better Internet browser and longer battery life.
Applications remain a weak point. Developers say it is harder to write programs for the BlackBerry, especially ones with spiffy graphics and multimedia features. “When you create an application for R.I.M., you have to put in 30 to 40 percent more effort to make it look like what it would look like on the Android or the iPhone,” said Walter Doyle, the chief executive of uLocate Communications, which makes applications to locate businesses on maps.
“Yes, it is a little more difficult to develop on R.I.M.,” Mr. Lazaridis said. The company is working on new tools that will speed the work of applications programmers. But to serve the needs of its big corporate clients, he said, applications will still have to comply with sometimes cumbersome security procedures.
“It’s not a free-for-all,” he said.
That security is a crucial selling point for many customers, including President Obama, probably the best-known BlackBerry user. Mr. Lazaridis says R.I.M.’s precautions protect everyone.
“You’re starting to do banking on your handset,” he said. “Which would you rather use: something that can be hacked in five minutes or something the F.B.I. uses?”
This article is from www.nytimes.com
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