RIM's BlackBerry Messenger App Dilemma

RIM's BlackBerry Messenger Dilemma
RIM's BlackBerry Messenger Dilemma

Research In Motion's

(RIMM) BlackBerry Messenger service, a unique selling point for the company, is expected to be made available as an app on other smartphone operating systems like Google's (GOOG) Android and Apple's (AAPL) iOS. Although RIM competes with Apple, Google, Nokia (NOK) and Microsoft (MSFT) in the smartphone OS market, it's looking to leverage the success of competitors Google and Apple to grow its business.

Here we take a look at the potential benefit to RIM from this initiative. We maintain a $74.28 price estimate for RIM stock, which is about 20% above market price.

BlackBerry Messenger an Important Service for RIM

RIM's push email service delivers messages instantly, and is hugely popular among BlackBerry users. Messenger is included in the BlackBerry subscription and works faster than "instant" messaging services on other smartphones. In addition to messages, it can be used to send photos and videos between two BlackBerry phones. According to the report, the app will be a stripped-down version of the actual messenger service, and will be introduced with the hope that as users become familiar with the service, they might become more interested in purchasing a BlackBerry phone to get the full BlackBerry Messenger experience.

Increasing Competition

RIM has faced heavy competitive pressure over the last year or so, which caused its market share in smartphones to decline from around 20% in 2009 to 16% in 2010. In the overall mobile phone market, RIM has only seen moderate growth, with its market share increasing slightly from 2.8% in 2009 to 3.2% in 2010.

By comparison, the iPhone's overall mobile phone market share has jumped from 2.1% in 2009 to 3.1% in 2010, putting it within striking distance of RIM.

Is RIM Making the Right Move?

Although the stripped-down app version of BlackBerry Messenger does provide RIM with an opportunity to further popularize its service and introduce new users to its platform, there's a very real risk to this strategy. BlackBerry Messenger is a unique service provided by RIM, and if users are satisfied with the limited app feature, even existing BlackBerry users might toss their BlackBerrys aside in favor of more glamorous iPhones or Android smartphones. After all, the app would provide the core messaging feature, even though premium features like sharing of photos and videos may not be there.

See our full analysis and $74.28 price estimate for RIM

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