ChangeWave Research Report:

Consumer Smart Phone Trends

Research In Motion Gets Set to Counterattack

August 1, 2008

Overview

A June 2008 ChangeWave consumer survey showed the new Apple (AAPL) 3G iPhone release would have a tsunami-like impact on the smart phone market.  But what does that mean for current market share leader Research-in-Motion (RIMM)?

The ChangeWave survey showed the 3G iPhone announcement catapulting Apple into the lead in terms of planned consumer smart phone purchases. But it should be remembered that RIM has a huge lead of its own in the corporate smart phone market.

Also, RIM (42%; unchanged) is the leader among current owners in the consumer market.

Moreover, RIM isn't sitting idly by while Apple roles out its 3G iPhone. The Canadian manufacturer has multiple plans in motion to counter Apple's momentum among consumers - including an already announced new product release (the Bold) and two likely additional product releases (the Thunder and Kickstart).

In this report, we take a close-up look at what 3,567 consumers have to say about RIM's new counteroffensive.  The survey was conducted in the aftermath of the Apple announcement (June 17-23), but before the 3G iPhone release.

Get Ready For Multiple Battles

Consumer respondents were presented a brief description containing key features of the new RIM models, along with a follow-up question asking them how likely they were to buy each model if and when it becomes available.

As the following chart shows, the new RIM releases each have considerable potential among consumers once they actually get into the marketplace.

A total of 4% of respondents report they are Very Likely to buy the new RIM/BlackBerry Bold when it becomes available. Another 13% are Somewhat Likely.

Slightly less positive but nonetheless significant – 2% of respondents say they’re Very Likely to buy a RIM/ BlackBerry Thunder when available. A total of 13% are Somewhat Likely.

Another 2% say they are Very Likely to buy a RIM/BlackBerry Kickstart when it becomes available, and 11% are Somewhat Likely.

Here is the actual question that was asked, along with the findings:

Credible sources suggest Research in Motion (RIM) may be planning to release several new smart phones this year, including the Kickstart, Thunder, and already announced Bold. They will each likely contain BlackBerry's hallmark features such as push email, camera, GPS, and Wi-Fi, as well as features unique to their specific model.

Please rate how likely you are to buy each of the following RIM smart phones for yourself if and when they become available? (n=1,770)

Bottom Line:  Apple and RIM are clearly on a collision course in the consumer smart phone market, as the three new products from RIM – the Bold, Thunder and Kickstart – get launched to counterattack the market assault from the Apple 3G iPhone. 

Our current survey results show that these new RIM releases have considerable potential among consumers – but once they get out into the marketplace, the real test is how satisfied consumers will be with their new Blackberries.

Put this in the context that our ChangeWave surveys have also been showing tsunami-like growth for the 3G iPhone. And the combination of the new Apple model flying off the shelves and rumors of a postponement for one of RIM’s new releases have already raised questions among some analysts as to RIM’s ability to punch back.

We will, of course, be closely measuring the initial reaction once consumers have their new Blackberries. If it turns out that the initial reviews on RIM’s new releases aren’t great and consumer satisfaction goes down, then yes RIM will almost certainly receive rough treatment from the Street.

But to date, the strength of our early survey results on the demand for RIM’s new products points to a powerful counter-offensive in the making by the Canadian manufacturer. 

The real losers here are most likely to be the second-tier smart phone players, who find themselves increasingly being pushed to the sidelines as the two Goliaths battle for market place dominance.

In this regard, we took a close look at the impact of the new RIM releases on the rest of the industry in our June survey.

Not surprisingly, current RIM customers are two-to-three times more likely to buy the new RIM models than the customers of other manufacturers’.  But the new RIM releases also have significant potential to lure customers from other manufacturers – in particular those of Palm, Samsung and Motorola.

Apple customers appear least likely to buy any of the new RIM releases.

Here’s the ChangeWave data on those consumers who say they are likely to buy the new Blackberry models:

Likeliness to Buy New RIM/BlackBerry Models - Breakdown by Current Manufacturer

In sum, while the Apple iPhone has captured the hearts and minds of its user base, so has the RIM BlackBerry. In terms of winners, the global consumer and enterprise smart phone markets are big enough to support both Apple and RIM – it’s the other cell phone manufacturers that look like the real losers.

This report presents the findings of a recent ChangeWave Alliance survey on Cell Phones and Cellular Service Providers. The survey was conducted June 17 – 23, 2008. A total of 3,567 Alliance members participated.

The Alliance's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master's or Ph.D.) and 93% have at least a four-year bachelor's degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

ChangeWave Research, a subsidiary of InvestorPlace Media, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 15,000-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave delivers its products and services on the Web at www.ChangeWave.com.

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

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