ROME
Mike Lazaridis,
the founder and co-CEO of Research In
Motion, made a quick trip to Italy this week and no doubt
left with a big fat grin on his face. That's because Italy has gone from a BlackBerry dead zone to RIM's
second-biggest European market, and one of the world's top five or six, in only
two years. The BlackBerry is suddenly everywhere
on the streets of Milan, Turin
and Rome - the
perfect accessory for a well-tailored suit in the continent's most
fashion-conscious and gadget-obsessed country.
Mr.
Lazaridis met with Telecom
Italia Mobile (TIM), the wireless arm of market leader Telecom Italia. The
details of the discussions aren't known, but they probably centred
on how to build on the phenomenal sales momentum and transfer the experience to
other potential high-growth markets.
RIM
came to Italy
in 2002 and no doubt expected to make a splash. The country seemed a natural
market for the BlackBerry. Italians adore their
mobile phones; Italy
has one of the highest wireless penetration rates on the planet. The
Italians are also show-offs. Inordinate amounts of disposable income are
spent on fancy cars, clothing, jewellery and
electronic devices. BlackBerry ownership would
only raise the conspicuous consumption stakes. Businesses might also find it
useful.
Things
didn't work out quite as planned. By 2005, the BlackBerry
had gone pretty much nowhere in Italy.
At that point RIM and TIM, the Canadian company's main Italian partner,
realized the marketing and the pricing weren't hitting the mark. At
first the BlackBerry was pushed on big
corporations, where the travelling
three-country-a-week men and women with expense accounts work. The problem
is that Italy
has a distinct lack of really big companies. The vast amount of wealth and job
creation is among the "SMEs" - marketing
jargon for small and medium-sized companies. In fact micro-enterprises,
businesses with 10 or fewer employees, make up almost half of the Italian work force.
That's the highest in Western Europe. The
figure in Germany
is 20 per cent.
So
the decision was made to go after the smaller companies too, which isn't as
easy as it sounds. Italians aren't the richest people in Europe.
They also have a cultural aversion to contracts - the vast majority
of mobile phones used in Italy
are pay-as-you-go. Unless you're a corporate customer of some size, you
have to pay 400 ($549 Canadian) for a BlackBerry
device. The service contract - e-mail, Internet browsing and the like - might
be 30 a month. Add it all up, and a three-year contract will set you back
1,500 or more. Mamma mia!
Enter
Mr. Lazaridis. In 2005 he came to Italy and met
with TIM executives in an effort to get BlackBerry's
Italian show rolling. A pay-as-you-go option was launched, which proved an
immediate hit. E-mail contract prices for small and medium-sized
enterprises were dropped to about 10 a month. TIM launched an aggressive
advertising campaign, featuring the requisite well-endowed young women. Mr. Lazaridis also met with Dolce & Gabbana,
the Milan
fashion house, and asked them to design BlackBerry
accessories such as carrying cases.
Sales
took off. Wes Nicol, BlackBerry's
director of commercial operations in Italy, says sales
"exploded, with some months showing growth of several hundred per
cent."
The
launch last year of the Pearl,
the slimmed-down BlackBerry, took the sales growth to
an even higher level.
The Italians like the Pearl
because it's compact and looks good. They think the full keyboard on the other
models makes the device look clunky.
RIM
won't give details of its Italian sales, though some clues come from TIM. In
the first half of 2006, the company sold 41,000 "mobile office
devices," which you can assume were largely BlackBerrys
(though not necessarily the Pearl,
which TIM classifies as non-office device even though it can send e-mails). In
the first half of this year, the number jumped to 170,000. The quarterly
results, due today, are bound to show another huge increase.
For
RIM, and TIM, the potential is huge. At last count, TIM had more than 34
million mobile phone lines in operation (giving it a 40-per-cent market share).
Of that amount, about 600,000 are corporate lines. If the BlackBerry
captures even a few percentage points of the larger figure, Italy
will rank as one of RIM's greatest success stories.
RIM will only say it thinks it can achieve sales of a million BlackBerry units in Italy within five years.
On
the stock market, RIM has soared. Its market value of about $70-billion is
equal to Royal Bank's, Canada's
biggest bank. RIM shares have almost tripled from their year low and the
stock's price-to-earnings ratio is 73, versus a mere 12 for Royal. RIM shares
look outrageously expensive on this measure. But when you consider the growth
in Italy
and dozens of other countries, you might consider the shares good value.
ereguly@globeandmail.com
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