Outages could rattle BlackBerry's iconic status

TORONTO Tue Feb 12, 2008 6:02pm EST

A shareholder uses his Blackberry while waiting for the Research In Motion annual meeting to begin in Waterloo, Ontario, July 17, 2007. Research In Motion said on Tuesday it is too soon to determine the cause of a massive BlackBerry service outage that left subscribers across the Americas with spotty or non-existent access to wireless e-mail for about three hours on Monday. REUTERS/J.P. Moczulski

A shareholder uses his Blackberry while waiting for the Research In Motion annual meeting to begin in Waterloo, Ontario, July 17, 2007. Research In Motion said on Tuesday it is too soon to determine the cause of a massive BlackBerry service outage that left subscribers across the Americas with spotty or non-existent access to wireless e-mail for about three hours on Monday.

Credit: Reuters/J.P. Moczulski

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TORONTO (Reuters) - Research In Motion's RIM.TO RIMM.O BlackBerry could lose its iconic status in the eyes of corporate and retail subscribers alike if it doesn't manage to stem service problems such the ones that led to two major outages in less than a year, analysts say.

A three-hour service problem left subscribers across the Americas with spotty or nonexistent access to wireless e-mail on Monday.

RIM said late Tuesday an early investigation pointed to a problem with an upgrade of a data routing system. The upgrade was part of an ongoing effort to expand capacity for long-term growth, it said.

The outage hit RIM's most important market, with about two-thirds of its roughly 12 million subscribers in North America.

The region was also the center of a longer outage that snarled wireless e-mail last April. That time, RIM blamed a new storage feature that hadn't been properly tested.

Research Capital analyst Nick Agostino said that in previous years, there was "relatively little" disruption to RIM's service, used by executives, politicians, lawyers and other professionals to send secure e-mail to and from handsets.

Now, two major outages have occurred in the space of 10 months.

"Obviously, if this sort of frequency and pattern continues, then it'll certainly start to turn people off longer term," Agostino said.

Observers said the latest service problem probably doesn't mean corporate and retail consumers will give up on the BlackBerry.

However, even without outages, information-technology managers should be looking for alternatives, said Avi Greengart, research director at Current Analysis.

"Any outage is a cause for concern, particularly if you're an IT manager," Greengart said. "Your job is to ensure service availability."

While many IT managers have some fallback options in place, the latest outage could spur more to find alternatives, he said, but added that handing employees two different devices could be impractical.

The service disruption last year didn't deter investors. Shares of Waterloo, Ontario-based RIM more than doubled in 2007 amid impressive growth in its subscriber base and profits that beat analyst expectations.

However, the stock has had a rough start in 2008, falling about 20 percent so far amid worries over a possible U.S. recession and its potential impact on BlackBerry orders.

RIM's volatile shares fell $2.97, or 3.14 percent, to finish at $91.50 on the Nasdaq market on Tuesday. They fell C$2.98 to end at C$91.64 on the Toronto Stock Exchange.

While problems with service may not add to concerns over RIM's fundamentals, they certainly aren't helping.

"We have some gnashing of teeth, and we move on," said Iain Grant, managing director at SeaBoard Group in Montreal. "If another one happens relatively soon, I think ... some harder questions will be asked."

($1=$1.00 Canadian)

(Additional reporting by Sinead Carew; Editing by Peter Galloway)

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