* Carriers sour on paying service fee - Northern analyst
* Analyst drops RIM from "speculative buy" to "sell"
* Another U.S. government agency to ditch BlackBerry server
* Stock nears 8-year low
By Alastair Sharp
March 5 Research In Motion will
be forced to slash the fees it charges carriers for BlackBerry
service this year, an analyst said on Monday as another U.S.
government customer edged away from the service, cutting into a
pillar of the struggling smartphone company's business model.
RIM runs its own network infrastructure, enabling it to
encrypt, compress and push data to BlackBerry phones via a
cellular network. The Canadian company brought in almost $1
billion from this high-margin service last quarter, one-fifth of
its total sales.
But a second U.S. government agency in as many months, the
Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), said
on Monday it would remove its BlackBerry servers in favor of a
nimbler alternative that offers support for a wider variety of
According to Northern Securities analyst Sameet Kanade, RIM
- once the only option for secure mobile communication - has
moved too slowly to counter the threat posed as companies and
governments increasingly allow employees to use their own mobile
devices for work. Meanwhile, carriers have soured on paying the
BlackBerry service's fee, he said.
"We now firmly believe that RIM does not have the luxury of
time on its side," Kanade wrote in a note to clients in which he
cut his rating on RIM stock to "sell" from "speculative buy" and
chopped his target price for RIM shares to $7 from $24.
RIM's shares fell 4.3 percent to $13.20 on Nasdaq on Monday
afternoon, 75 cents above an eight-year low they hit in
December. They have shed 80 percent of their value since
February 2011 due to RIM's falling U.S. market share, botched
product launches and dismal earnings.
Several analysts predict another dire earnings report later
The stock was down 3.4 percent at C$13.13 on the Toronto
RIM has struggled to match the consumer-friendly features of
Apple's iPhone and iPad or the ever-improving hardware
of devices using Google's Android software, which have
both made strides towards matching the famed security that once
ensured corporate loyalty to the BlackBerry.
Highlighting the risk for RIM, the ATF said it plans to
remove its BlackBerry servers by the end of the year.
The ATF's 2,400 BlackBerry-wielding field agents will switch
to iPhones due to better maps, streaming video and other
applications on the Apple device, the agency's chief information
officer, Rick Holgate, said in response to emailed questions.
Another 1,400 staff will retain BlackBerrys managed by
Atlanta-based AirWatch, whose device-agnostic service starts at
$3 per user per month, plus set-up and other fees. The new
system will allow the agency's employees to use their own
devices, although this has not yet been authorized.
"We are moving to an email-as-a-service model in which
BlackBerry support is also included, so we will no longer need
our own BlackBerry Enterprise Servers," Holgate said.
In response, RIM said that it works closely with its more
than one million government customers in North America "who rely
on the unmatched security of the BlackBerry platform".
Another U.S. agency, the National Oceanic and Atmospheric
Administration, said last month it would ditch its BlackBerry
servers by June to trim costs, while Washington's main
procurement agency has started to issue iPhones and Android
devices to its workers.
Oilfield services company Halliburton plans to
switch 4,500 BlackBerry-toting employees to iPhones and a slew
of banks have also welcomed BlackBerry rivals.
RIM's make-or-break BlackBerry 10 smartphones, due out later
this year, will require a new server software component called
Mobile Fusion that also allows its core enterprise customers to
manage rival devices.
But while Mobile Fusion is due out this month, Northern
Securities' Kanade said both traditional software companies and
carriers are already introducing similar products at a lower
He estimates RIM gets roughly $5 a month per subscriber,
which could fall below $2 per user by February 2013. He expects
service revenue to fall 48 percent in the next two years.
Northern's parent company owns Jaguar Financial, which has
agitated for radical change at RIM, including a break-up or