Palm is facing deep challenges
to compete with Apple's iPhone, while
Research In Motion's BlackBerry
also seems set to lose market share to the device, at least in the consumer
market, an analyst reports.

Needham & Co. analyst Charles Wolf has commenced coverage of Palm and RIM,
and notes both companies face challenges as iPhone wins hearts and minds in
the consumer and enterprise markets.

Palm faces the deepest challenge. Wolf warns the company has "lost its
way". The lack of a new OS release in five years means the company is increasingly
reliant on in-development products to regain its lost market lead.

"Neither is likely to be introduced until late in the year. Even then,
it's an open question whether they'll be successful. We're initiating coverage
with an under perform rating," Needham & Co. said.

Wolf also believes that Apple's iPhone may take market share from both competing
firms once it introduces new enterprise-friendly features in June. RIM will
see some impact in its core enterprise markets, while the expected diversity
of third-party iPhone applications will hammer Palm's place in the consumer
market.

"We believe BlackBerry's supercharged growth in this [consumer] market
could slow materially when far more versatile applications developed for the
iPhone begin to appear in the second half of the year," Wolf warned.

The analyst does note that this triptych of smartphone developers still hold
a great lead on most competitors, because other firms (such as Motorola
or Samsung) are tied
to Microsoft's Windows
Mobile system, which Needham & Co. calls "a non-starter in the
consumer world".

The introduction of Google's
Android platform for mobile phones may change the game once again, the analyst
said, as it will offer a more extendible base OS than Windows Mobile to competing
firms.

Despite it all, Wolf notes that Apple changed the smartphone industry when
it chose to launch iPhone, describing the market as "totally disrupted"
by the product's introduction.

"The iPhone is a game changer, weaving together a wide array of computer-like
functions," he explained. "Given the choice between a BlackBerry and
iPhone, we believe a material percentage of consumers will opt for the iPhone
once exciting applications for the phone begin to proliferate in the second
half of the year. BlackBerry sales should continue to grow but at a materially
slower rate than they would have in the absence of the iPhone."

Research In Motion's market leadership is based entirely on the incompetence
of the competition, the analyst also said: "RIM's competitors until quite
recently were simply inept. Their failure stemmed less from their ability to
design sleek phones than in their choice of an operating system on which to
run them," he explained.

The analyst rates Palm shares as under-perform, while RIM takes a hold rating
pending the effects of June's release of iPhone Software 2.0.

» posted by abennett

Macworld.co.uk

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