Why Competition Matters: Apple & RIMM

Here is a very interesting smart-phone study that primarily deals with Apple’s (AAPL) iPhone and RIMM’s (RIMM) Blackberry. This has nothing to do with value investing although it does show how tech margins always compress when a hot products sees competition.

Crowd Science Smart Phone Results

So, if you are RIMM seeing this study you have two options:
1- Lower your blackberry prices to capture value conscious buyers
2- Dramatically improve the add-on availability and functionality of the social aspects of your product.

Either of those options will cost RIMM and benefit users of their products. Apple users are very loyal no matter what the product. RIMM has very little chance of altering that barring an earth shattering product. Their choice is to now keep their users and entice those entering the smart-phone market to buy theirs over Apple’s.

With Apple lowering the price of its 3G 16GB phone to $147 in Wal-Mart (WMT), (down from the original $599 8GB price only just over two years ago), consumers ought to see even better deals in the future.

How long before a 32GB 4G phone hits the shelves for $99? Another year? RIMM needs to so something fast. Now, I discount the “loyalty” part of the equation for the Apple folks. They were this way about the company before the iPhone. What matters more here is the number of “other smart-phone” users considering buying an iPhone with their next purchase.

That means defections for RIMM and other makers. It also means they are probably busying themselves finding ways to bend over backwards to give users “a deal they cannot resist”. RIMM did drop prices last year and was very successful capturing value conscious shoppers. Apple followed suit and based on RIMM most recent earnings call, that drop looks to be having an effect on RIMM going forward.

What does it all mean then? Look for more applications, better & faster phones and lower prices going forward….

Capitalism at its finest..

Disclosure (“none” means no position):Blackberry user, none in stocks