RIM Crushes the Competition

June 09, 2008

By Jim Woods and Paul Carton

Defying an otherwise soft IT spending environment, Research In Motion (RIMM) is continuing to blow away the competition -- expanding on its already vast share of the corporate smartphone market.

While corporate IT spending in other areas is far less robust, there are signs that the spending slowdown may be stabilizing after a long and unsettling decline.

The message gathered from our May survey of respondents involved with their organization's IT spending was clear: Companies are all about smartphones.

Research In Motion Destroys the Competition

We gathered extraordinarily upbeat results for Research In Motion -- up three points to 76%. The Canadian BlackBerry-maker is expanding its already dramatic lead in the corporate smartphone market, as second-place Palm (PALM) continues its long-term decline -- down one point to 17%.

Moreover, when we looked at future planned purchases for the third quarter, RIM also dominated. An astonishing 82% of respondents said their company plans to buy BlackBerrys -- a five-point jump since February.

The Apple (AAPL) iPhone now ranks second in terms of planned corporate purchases, up two points from previously to 13%, while Palm continues to languish, earning a miniscule 8% of future purchases.

Despite RIM's upbeat results in the smartphone market, overall corporate IT spending remains anemic with very few signs of an uptick going forward. Our findings point to continued economic weakness during the second half of the year.

Q2 IT Spending Languishes

We asked respondents if their overall IT spending was on track thus far into the second quarter. Eleven percent of respondents said their company had spent more than planned, which is a one-point increase since February. Twenty-seven percent said their company spent less than planned -- unchanged from previously.

As the chart below indicates, current IT spending hovers at virtually the same lowered level that it was at during the previous quarter. On the bright side, though, it's a positive sign that things haven't gotten any worse.

Looking ahead to the third quarter, nearly 24% of respondents said their company's IT spending will decrease (or there'll be no spending at all). That's a one-point decrease since our previous survey. In addition, only 15% said spending will increase, which is unchanged from previously.

Softness in projected spending is occurring among companies of all sizes, although, once again, projections have stopped slowing. This is a sign that things have begun to stabilize, at least temporarily, if not long term.

But the question to be answered is: When are things going to get better for IT spending?

Bearish on the Second Half of 2008

When asked about their IT spending outlook for July through December, 28% of respondents said they believed that their IT budget will be less than the first half of the year -- a whopping eight points worse than previously.

Only 18% said they believe that their company's IT budget will be greater than it was during the first half of 2008. Another 44% said they think their IT budgets will remain the same.

So, while the slowdown in corporate IT spending may finally be stabilizing, ChangeWave's survey results point to continued economic weakness during the second half of the year. At the very least, our findings provide little support for the thesis that a V-shaped U.S. economic recovery will occur during the third quarter. Rather, they strongly suggest that businesses will hold their breaths regarding capital spending -- possibly until the November elections.

However, Research In Motion's success in the smartphone market remains one extraordinarily bright spot in the IT economy, and the BlackBerry-maker appears likely to enjoy one of its best quarters to date.

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Paul Carton is the Research Director of the ChangeWave Alliance. Jim Woods is ChangeWave's Senior Editor. The Alliance is a network of 15,000 highly qualified business, technology and medical professionals in leading companies of select industries. The Alliance is surveyed weekly on a wide range of business and investment research and intelligence topics.