Blackberry: Not Exactly DOA, but Close

In the Hutong

Munching peanuts

2035 hrs.

About a week ago I was listening to somebody on CNBC (I don’t remember whom, but he was in New York, not Singapore or Hong Kong) tout Research in Motion (RIM) because they are about to launch in China, and that’s going to mean big things for the company.

With respect to the folks at CNBC, the guys over at Reuters have run a much more sober piece (via CNET) about the challenges RIM faces in marketing its BlackBerry devices and services here in China. Reuters correctly notes:

Local push e-mail services already exist that are price-competitive.
Chinese businessmen who can afford the device do not, in many cases, feel the same compulsive need to be hooked into e-mail. The phone is enough.

That’s all quite true. But it gets worse.

Moose in the Shark Pool

The article implies that RIM is considering stepping beyond its core market of high-end enterprise users. That would be a bad move. The sharks are out for RIM.

I have no doubt that BlackBerry will have an appeal among many expatriates - at least, those who don’t already have service from overseas - and senior Chinese executives of global firms. That’s not a giant market, but it is one that will be willing to cough up nearly US$1,000 a year for the service. (And lest you think I’m just an old cynic, I walk around China with a BlackBerry myself. Of course, It’s an unlimited global service plan from T-Mobile, but that’s beside the point.)

Device Cost - While pricing has yet to be set, a good indicator is Hong Kong. All devices are purchased in Hong Kong and China on pretty much the same basis - unlocked but no subsidy. My 8707, purchased from CSL, set me back the equivalent of RMB 4,000. There is no camera, no music, no external memory.
Device Competitors - Unlike when BlackBerry launched in the U.S., there are very real competitors in China who have prepared for BlackBerry’s arrival with devices that arguably match BlackBerry in email functionality and beat it in a host of other areas - for a lot less money. In fact, it is entirely possible that the launch of BlackBerry devices with China Mobile - delayed as it has been - will be accompanied by simultaneous launches of QWERTY devices from Nokia, Motorola, Samsung and Palm.
No Brand - The percentage of potential customers who know RIM is tiny. Not only does this mean that there is a minimum “anticipation” factor that will drive initial sales, but also that RIM has a long battle to fight to build the BlackBerry name. There are over 80 brands fighting for attention in China, and all of them have a better brand than him. In the case of companies like Motorola and Nokia, we’re talking decades more experience and billions in brand equity that RIM doesn’t have yet - and would have to spend millions to build.

RIM’s Smart Road to China

If the guys at RIM are sitting in their offices in Canada eagerly expecting China Mobile to reach into its cash hoard and pay to market BlackBerrys, they are in for a crushing disappointment. I suspect that, whatever their original beliefs, RIM now understands that this is not going to happen. If they don’t push Berries, nobody will.

The company faces a choice: invest millions in a sales, marketing, and advertising effort in China in an attempt to expand its natural market into the hyper-competitive heart of the mobile phone industry, or focus entirely - at least initially - on building and defending its home turf with lawyers, professionals, and the local offices of their global customers.

Those “low-hanging fruit” could do a lot to jump-start positive cash flow and begin building brand, a basis from which RIM could later build with more targeted offerings.

Stay away from the temptation of the big numbers, guys. Remember your market and stick with it. Doing so will make the difference between you having a business in China, and China sending BlackBerry home to North America in a body bag.

Source: Silicon Hutong

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