I think I'll short RIMM on tuesday. -->
Danger hangs on RIM
By Ian Fried
Staff Writer, CNET News.com
May 27, 2001, 6:00 a.m. PT
While a number of large companies are spending big bucks to outdo Research In
Motion, one start-up sees a way to do it on a shoestring.
By fall, Danger Research hopes the handhelds it has designed will be in the hands of
consumers, who will use them to browse Web pages and handle e-mail and instant messages
using a tiny keyboard similar to the one found on RIM's BlackBerry pager.
At the same time, Palo Alto, Calif.-based Danger, which was started by former Apple
Computer workers who have also spent time at companies such as WebTV and TiVo, has only
$11 million in funding--$9 million of which comes from Softbank Venture Partners.
Like WebTV and TiVo,
Danger doesn't plan to sell
the hardware itself. It will
instead offer partners a
prototype, forcing them to
bear the costs of production.
"This is a formula," Danger
CEO Andy Rubin said this
week. "We're just following
the recipe."
But Danger is taking things a
step further: It won't be selling
its service directly. Rather, it
will try to partner with wireless
carriers that want to offer
such a device. The carriers
will choose a manufacturer for
the device and will market the
service to customers, with Danger getting a monthly fee for managing the service.
"We're very, very, very behind the scenes," said Rubin, whose company is less than a year
and a half old.
Danger expects the price tag on its device to be half that of the roughly $400 BlackBerry.
That's because Danger--unlike corporate-oriented RIM--is aiming primarily at the much larger,
but more price-sensitive, consumer market.
To keep the cost of the device down and thus make it more attractive to consumers, Danger
will store and process all information on a server, with the handheld used mainly to download
and store contacts, calendar items and e-mail. The current prototype has 8MB of memory and
uses a low-end processor similar to those found in cell phones, Rubin said.
While Danger's strategy should help keep down the costs of building the business, it also
carries high risks, IDC analyst Kevin Burden said.
"The problem with trying to do anything with the carriers is they are receiving 50 deals a day,"
he said. "The carriers would be spreading themselves very thin if they tried to do every deal."
Motorola and Palm, among others, are also taking aim at RIM. Motorola has several e-mail
pagers on the market already. Palm has promised by the end of the year a new wireless
handheld that will offer always-on access to corporate e-mail.
RIM itself has tested the consumer waters, offering a version of its BlackBerry to AOL and
Yahoo subscribers.
RIM could not be reached for comment.
Danger's approach is not too dissimilar from the current tack of Netpliance, which decided in
November to get out of the business of selling Web-surfing appliances itself and instead is
helping Internet service providers to sell and manage such gadgets.
ReplayTV was pursuing a similar strategy in the digital video recording market before its
acquisition by Sonicblue earlier this year.
"The only difference here is we're not changing midstream," Rubin said. "We gained that
experience in our previous lives."
In this life, Danger plans to offer a small handheld that can browse the Web using full HTML
and handle e-mail and instant messages.
"I would say we're a RIM-plus-plus," Rubin said.
While Danger executives credit RIM for several innovations, such as the keyboard, they said
they are not worried about a recent patent granted to RIM for the way it redirects corporate
e-mail, a feature Danger plans to offer.
"We are planning to look at the patent; we just haven't yet," Chief Technology Officer Joe Britt
said.
Rubin said that by using a wireless carrier's brand name, Danger can avoid the heavy
marketing expense that TiVo and WebTV faced. Plus, the company should be able to benefit
from the job RIM has done of showing the virtues of always-on e-mail.
Assuming Danger can get a carrier to bite, which is a big challenge, Burden said such a
strategy could work.
"Is it a business model that can work?" Burden said. "Six months from now, I think we'll know
a lot more." |
