RIM's First Test: A Preview With Carriers

NEW YORK—Research In Motion Ltd. RIMM -6.32% will start delivering nearly complete versions of its new smartphones to carriers next week—the start of a crucial effort to convince consumers and carriers alike that the BlackBerry can compete with the iPhone and Android devices.

RIM Chief Executive Thorsten Heins, in a briefing with The Wall Street Journal, said the company will show two "beta" versions of its new phones to carriers during the five-week roadshow. The meetings will test RIM's credibility as it tries to regain its footing in the global smartphone market.


Apple Inc.'s AAPL +0.27% iPhone and phones running off Google Inc.'s GOOG +1.31% Android operating system have been gobbling up market share, largely at the expense of one-time leaders RIM and Nokia Corp.

Mr. Heins said RIM will be ramping up production of the test devices over the next few months, and he stood by RIM's early 2013 rollout date for the finished product.

Mr. Heins, who took the top job in January with a promise to focus on execution after several product-rollout delays, had originally said the phones would be ready this year. But in June he pushed back the release to the first quarter of next year after the software integration took longer than expected.

The physical shape and feel of the new phones is finished and the software nearly complete, Mr. Heins said.

"We're near the finishing line," he said.

Mr. Heins showed off the early versions of the new phones to a number of media outlets this week, as analysts at research firm Gartner circulated data showing RIM's world-wide market share among smartphones fell again in the second quarter, to 5.2% from 11.7% a year earlier.

RIM will initially launch two phones, both powered by a new operating system called BlackBerry 10. One device will be an all touch-screen phone similar in design to the iPhone. The other will have both a physical keyboard—a favorite feature for many die-hard BlackBerry users—and a touch screen.

Mr. Heins said there will eventually be six phones—three that are all-touch screen and three with physical keyboards.

RIM has staked its future on the new phones and the BB10 operating system, which will also power its poor-selling PlayBook tablet.

The success of the phones hinges in part on the reception they get from carriers like AT&T Inc. T -0.37% and Verizon Wireless. Carriers can choose to market the new phones heavily if they think they will be a hit, or they can relegate them to the back of the store.

One carrier executive who has seen presentations of recent versions of the phone said he thinks it is a marked improvement over its existing devices and potentially gets the company more competitive with Android. The executive said he is fairly confident that RIM will be able to meet the first-quarter deadline with some carriers given the focus the company has given to the new devices.

Wireless carriers also require that new devices pass various tests to make sure they operate on a carrier's network and meet certain performance requirements for battery life, call quality and Web browsing and many other factors. On average it takes about four to eight months for a carrier to test a beta version of a phone, said a person familiar with the process. One additional challenge for RIM will be that its new smartphones have a new operating system and design, which typically requires additional checking and time for testing.

The carriers want RIM to succeed to help provide a counterweight to Apple and Google. However, even heavy promotion doesn't guarantee success with customers. Nokia's new Lumia smartphones built on the new Windows operating system have received positive reviews and strong marketing support with heavy discounts, but sales have been disappointingly weak.

Mr. Heins said he expects to have widespread carrier support for the BlackBerry 10 rollout. "The carriers want us to keep that installed base [of BlackBerry users]," he said.

"We value our relationship with RIM and look forward to working with them on existing and new products," said Mark Siegel, AT&T spokesman. He declined to comment on specific product plans.

Mr. Heins also gave some new details about the BB10 phones' features. The phones will have replaceable batteries, Mr. Heins said, a decision made to appeal to heavy smartphone users who frequently run out of battery time and don't want to carry chargers around.

RIM shares have fallen nearly 70% in the past 12 months. But the sell-off has abated recently, with shares rising almost 13% since the end of July. Some big-name investors have bought into the company, including Canadian value investor Prem Watsa, who in late July doubled his stake in the company to just under 10%. (RIM shares fell 6.3% to $7.56 on Tuesday as trading in RIM remains volatile.)

On Monday, Franklin Mutual Advisers disclosed it held 13.2 million RIM shares, or a 2.5% stake, at the end of June. It accumulated most of the holding in the second quarter, and now constitutes RIM's fifth-largest shareholder, according to FactSet. A Franklin spokeswoman couldn't comment on the specific holding.