The trouble's not over for BlackBerry

The high-status mobile email device has settled one legal battle, but faces growing market competition

In the space of not much more than five years, the BlackBerry messaging device has gone, in Europe at least, from an obscure piece of technology to a status symbol prized by executives - alongside a top-of-the-range car and a seat in first class.

So successful is the device, produced by the Canadian company Research in Motion (RIM), that it is known as the "CrackBerry". Users claim they become addicted to BlackBerry's "push" email service, which makes getting messages as easy as receiving texts.

But a growing number of BlackBerry users are considering going cold turkey.

The BlackBerry is the market-leading PDA - or handheld computer - selling 3.2 million units globally, the market research company Gartner said last month. RIM's grasp of the technology and the market have not gone unchallenged though. Two separate, and fearsome, foes, NTP and Microsoft, have been gunning for it.

The Canadians agreed on Friday to pay NTP, a patent-holding company, US$612.5m (£350m) to settle a longstanding, complex legal battle. NTP had argued that the BlackBerry technology infringed five of its patents, a claim RIM disputed.

A US court came close to closing RIM's American service, a move that would have left BlackBerry users stranded.

Before the settlement, RIM's chairman, Jim Balsillie, had described the NTP case as "one of the most flagrant abuses of the patent system" he had ever seen. But it forced RIM to develop a workaround solution to keep its services running, in case NTP got an injunction.

The uncertainty prompted some companies to reconsider their reliance on BlackBerrys. Earlier this year, Gartner issued an advice note recommending that clients delay any further investment in BlackBerry technology until the legal issues were resolved.

The legal dispute could not have come at a worse time. It coincided with a concerted push into the market by Microsoft through its Exchange Server email software and its Windows Mobile 5 devices.

Combined, the two technologies allow companies to run mobile email without going through a service provider such as RIM or committing to a mobile email contract from a mobile operator.

As Microsoft Exchange is the most widely used email server application, the potential market for an "all Microsoft" solution is extensive. Nor is Microsoft the only competitor. US companies Good Technologies, Seven Networks and Visto provide services either directly to businesses or as "white label" services through mobile operators.

RIM also has to contend with stiffer competition from Nokia. With a market share of over 30 per cent globally, Nokia is well placed to win substantial business. It has already announced a BlackBerry-style handset and a mobile email server, Nokia Business Centre, aimed at small and mid-sized businesses (SMBs). It also completed the acquisition last month of Intellisync, a US company that provides a similar service to RIM, but for Microsoft, Palm and other smartphones.

Companies with concerns about investing in BlackBerry have never had such a wide range of alternatives. According to Ferris Research, a San Francisco research group that specialises in messaging, 50 per cent of companies it surveyed expect to support BlackBerry next year. But by 2008, that will fall to 27 per cent. Analyst David Via says that although a shutdown of the BlackBerry service now looks unlikely, "the seeds of doubt have been sown" for many companies.

RIM also faces a further challenge, and this one could prove tougher than dealing with NTP. Although the BlackBerry is justifiably popular with large businesses, RIM is struggling to gain ground among smaller companies, self-employed professionals and consumers.

Industry observers expect the low cost, operator-independent alternatives offered by Nokia and Microsoft to appeal to smaller companies, especially those that already run Microsoft's Exchange servers. Operator-branded mobile email is likely to prove attractive to individuals and SMBs that want mobile email but do not want to manage their own software and hardware.

RIM does have its own entry-level BlackBerry Internet Service, but this lacks important features, such as online calendars. These are provided as standard by Microsoft and services such as Good Technologies' Goodlink. Nor has RIM made much headway with its BlackBerry Connect service, which allows users of non-BlackBerry phones and PDAs to use BlackBerry email.

"There is a large SMB market that wants push email and everyone is on to it. Microsoft and Nokia represent the biggest challenge to RIM's position," says Andrew Brown, a program manager at IDC, a market research company. "BlackBerry Connect is weak: it is software tacked on to a device, and there is not enough operator support or device support."

Businesses are also attracted by the idea of being able to access email on a standard phone: not everyone wants to carry a device with a qwerty keyboard. "Alternative [phone designs] will drive email usage; you will see that during the coming year from us and other players," predicts Florian Seiche, the European managing director for HTC, a smartphone manufacturer that supplies Orange, T-Mobile and O ₂.

The mobile operators say that they are not, as yet, seeing large-scale switches away from BlackBerry email services, but they do report growing interest in alternatives. According to Ed Williams, the head of business strategy at T-Mobile, customers are asking tougher questions. SMBs are especially interested in Windows-based options, he says.

T-Mobile, though, will continue to sell BlackBerry beside its MDA range of Windows Mobile phones. The operator is also working with HTC to put BlackBerry Connect on to its Windows PDAs. "Some of our customers are looking for a blend of technology, with BlackBerry for people who just need email and Windows Mobile for those who want to run other applications on top," he says.

RIM is discovering that in personal technology, it is not always the first mover that has the real advantage. Apple did not invent the MP3 player, but its iPod quickly became the best-selling device of its kind. The iPod's success has forced companies that have sold the technology for longer to throw in the towel.

And, like the market for digital music players a few years ago, the market for mobile email is still in its early days. The real potential lies in the 650 million business email users who do not have a BlackBerry or other mobile email device.

"The mobile voicemail market was predicted never to go beyond 30 per cent but it is now virtually 100 per cent," says Clyde Foster, the chief operating officer of Intellisync. "Mobile email has an equal chance of getting to 100 per cent."

He expects BlackBerry's rivals to sell mostly to people new to mobile email, who are looking for a wider choice of devices or additional functions. "Most people who have a BlackBerry, like it," he says. "Most people who would replace a BlackBerry with a [Palm] Treo will have done so by now. We will see some switching - but we are not chasing the 4 million BlackBerry users, but the next 100 million users."