Research-in-Motion (NASDAQ: RIMM) will release a new operating system which it says will allow its customers to move around the internet more quickly and make the use of its screen dynamics easier for consumers to use. That should help RIM expand beyond its core business user base along with its earlier attempts to broaden the Blackberry’s appeal.

RIM is locked in a five-way battle in the smartphone business. Apple (NASDAQ: AAPL) has its own iPhone operating system. A number of new handsets use the Google (NASDAQ: GOOG) Android OS. Microsoft (NASDAQ: MSFT) has a small piece of the market. Nokia (NYSE: NOK) still uses the old Symbian system to run its phones. It launched a new Symbian-3 based flagship smartphone today.

RIM realizes that Android-based phones are multiplying in number and sales. Apple said iPhone sales more than doubled in the last quarter. The Blackberry cannot hold the business handset high ground forever. There are too many alternatives for enterprise customers, many of which did not exist two years ago. RIM still offers proprietary servers which make it easier for IT departments to track phone use, but in a world in which cloud computing is growing, dedicated servers have lost much of their charm.

RIM could end up at one end or the other of the spectrum of operating system market share. No company has spent more to get a dominant position on the handset than Microsoft. But, porting dumbed down versions of Windows which is a proprietary system has gained it a global market share of less than 10% of smartphone sales. Mobile Windows was updated last month, but the new list of takers was small.

The most remarkable story in the smartphone OS market is clearly Android. It not only works well, but unlike its completion, it is open source so that handset companies and developers have a great deal of freedom to add new features. That has already driven adoption at Motorola NYSE: MOT) and China’s giant HTC. And Google has it own product, the Nexus One, which is off to a slow start.

RIM may regret the day that it did not open its new OS to a large number of outside developers. Microsoft has not either and its appears to have cost them. Apple has not, but its application system is open which is nearly as good as an open OS in terms of developer acceptance.

RIM is not Apple or Google, but it could be the next Microsoft, at least in the handset market.

Douglas A. McIntyre

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