May 31, 2005
Cingular Links Up With Good Technology
Forbes.com
 
Wireless e-mail software and service provider Good Technology has announced that cellular giant Cingular Wireless will become the first carrier to sell Good Tech's products directly to its business customers. The deal is a big step forward for the upstart company, and puts significant pressure on market leader Research in Motion.

"I think it's a big deal," says Think Equity Partners analyst Pablo Perez-Fernandez. "Both Cingular and Good are going to get a big benefit from it. It will allow [Good] to turn profitable a lot more quickly...and the impact on [Research In Motion] is going to be accelerated market share losses over the next couple of years."

Good sells wireless e-mail software and service for handheld devices that run on the Palm OS and Windows Mobile operating systems. It is a direct competitor to Research in Motion's (nasdaq: RIMM - news - people ) proprietary BlackBerry software and hardware, which leads the market.

In the past, Good Technology only sold its products through direct sales. But by making this deal with Cingular, Good gets not only its first partner, but access to the biggest wireless customer base in the U.S. Cingular--a joint venture between SBC Communications (nyse: SBC - news - people ) and BellSouth (nyse: BLS - news - people )--is the number-one wireless vendor in the U.S., with more than 50 million customers.

Good Tech should have much greater success selling its products through a phone company, rather than trying to do so itself, says IDC analyst Kevin Burden. "IT managers have always said to us that they expect to go to the carriers when purchasing a mobile solution," he says. "This deal plays right into that need."

The new distribution model will also help Good meet increased demand for its product, says Think Equity Partners analyst Pablo Perez-Fernandez. "Good is not a huge company, and demand for its product is exceeding its ability to deliver it," he says. "They can't really reach their potential under the current distribution model...but they can leverage the huge distribution of the carriers."

Partnering with Cingular will also take the first line of customer support out of Good's hands, reducing the cost to the company, particularly as the number of customers increases.

Good's executives say that the new distribution model is a huge step in expanding the company's business. "Our view is that in spite of the fact that we haven't been as convenient to buy, we've gained tremendous ground," says Chief Executive Danny Shader. "[Research in Motion's] business took off when they got distribution, and we expect the same to happen."

Consumers likely will benefit from the deal, as increased competition leads to a price war in the space. "RIM has had a virtual monopoly," says Perez-Fernandez, "but now everything is aligning for [Good] to steal market share. There will be some pricing competition between these two companies.... It's going to change the pricing, I guarantee."

This isn't the first time Good Technology and RIM have tussled. When Good started selling its GoodLink e-mail service five years ago, it was as an alternative software which ran directly on BlackBerry devices. Two years ago, the companies sued each other for patent infringement; the fight ended in March 2004, when Good agreed to pay RIM a lump sum and ongoing royalty payments.