September 28, 2001 1:25 PM PDT

Good challenges RIM's BlackBerry

Good Technology is counting on solid industry connections to pay off as it looks to take on Research In Motion and its BlackBerry device in the wireless e-mail arena.

The Sunnyvale, Calif.-based start-up has been shopping both server software and a pager-like device to large businesses that will enable companies to securely send and receive e-mail to remote workers, according to sources. The server software is likely to be available first, followed by a device. The server software could also be used with third-party wireless devices besides Good's pager.

Company representatives declined to comment.

Good faces a big obstacle in the form of Research In Motion, which currently has a lock on the e-mail pager business. But Good Technology has received funding from first-tier venture capital firms such as Kleiner Perkins Caufield & Byers as well as Benchmark Capital. John Doerr from Kleiner Perkins and Bruce Dunlevie from Benchmark are on Good Technology's board of directors.

The company has been in stealth mode and has been "focused exclusively on delivering mobile computing solutions to the enterprise," according to the company Web site. In its first year of operation, Good Technology shipped a digital audio player expansion module for Handspring Visor handheld computers.

Details on the e-mail device and service remain unclear partly because the start-up is still months away from market, according to sources.

Handspring may be working with Good Technology in the future, according to sources. The two companies have common investors, one of which has a reputation for being a company matchmaker. Both Doerr and Dunlevie are on the board of directors at Handspring, and Doerr in the past has encouraged Kleiner-backed companies to work together as part of Kleiner's philosophy of "Keiretsu." Keiretsu is a Japanese expression describing "the principle of interlocking operating relationships between companies," according to the Kleiner Web site.

Handspring, which this week announced a deal with Aether Systems, is partnering with other companies to bring corporate data to its handhelds. A Handspring representative declined to comment for this report.

Good, which was founded in March 2000, started out with the Visor audio attachment, working on the assumption that enough Handspring devices would sell to support companies focusing on add-ons using Handspring's "Springboard" expansion slot. But the market for Springboard modules has been modest at best. The SoundsGood module is no longer available and is not being manufactured anymore, according to the company.

Good Technology recently brought in Danny Shader, a new chief executive and entrepreneur-in-residence at Benchmark, to help the company transition its focus from consumers to large corporations. Former co-founder and Chief Executive David Wharton is now the chairman of Good Technology.

The success of RIM has led many to covet the two-way communications market, partly because it counts a lucrative base--large companies--as its primary customer. The start-up will enter what is quickly becoming a crowded market, as other companies, such as Motorola and Danger Research, jump into what many see as the next step in portable devices.

Danger Research is also in start-up mode and on Sept. 5 demonstrated a prototype device, which the company expects to start shipping in the first quarter of next year. Earlier this year, Motorola announced that it had shipped its millionth pager, less than a year after its introduction.

During its most recent earnings report on June 21, RIM said it had a total of 210,000 subscribers. RIM not only sells BlackBerry pagers but also provides server software for corporate customers.

Analysts say Good Technology will be entering a crowded market and will need to differentiate itself to last.

"They have to demonstrate that their strategy is something that has longevity, that they have the funding and the support to carry it out," IDC analyst Alex Slawsby said. "Obviously, the way the economy is going, it's a tough environment, and they are going to have to prove that they can provide a solution that addresses (return on investment) concerns, that investments in Good's products and services can make the company save money in the long term and even in the short term. It's a tough time to introduce a product and expect a whole lot of orders for it."

Another analyst, who did not want to be named and who was familiar with Good Technology's plans, said the company's timing wasn't great.

"They've got a tough market," said the analyst. "There's a lot of inventory out there for BlackBerry handhelds--Aether Systems, a distributor for RIM, is sitting on a lot of devices for now, and they have to get out into the market. It's just not a market that's really amenable to a new hardware launch."

Even if Good Technology can get a competitive product to market at the right time, the company will face a massive marketing challenge.

"In today's funding environment, you need to have $100 million at your disposal to build a brand, and everyone's hoping that they can distribute it through a carrier," said the analyst familiar with Good Technology.

"Unless you're solving some really difficult technical problem, and it doesn't sound like they are, it's about building a brand and putting together a compelling end-to-end package. And they're not the only ones doing this."

Handheld makers Palm and Handspring will be entering the market as well. Both companies received Federal Communications Commission approval for wirelessly enabled devices in late August.

Palm had intended to announce an integrated wireless device with always-on e-mail access but has postponed that until early next year. Palm had received approval for a device known as the i705 that appeared to have those features.

Handspring also received approval for two devices, which are expected later this year. The devices are expected to run on the GSM mobile communications network and include short messaging capabilities and, on one of the devices, a keyboard similar to RIM's BlackBerry.

News.com's Paul Festa and Ian Fried contributed to this report.

 

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