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BlackBerry's Glitch Could Threaten Its Upward Mobility

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Bloomberg News

Published: February 13, 2008

Research In Motion Ltd.'s second BlackBerry failure in 10 months risks damaging the company's reputation as the most reliable service and gives a boost to Apple, Microsoft Corp. and Nokia Oyj.

The glitch shut off e-mail and Internet access for three hours Monday and affected all carriers in North America, where the company has more than 8 million subscribers. Co-Chief Executive Officer James Balsillie said that the company reacted quickly to correct the problem.

Companies increasingly may opt for e-mail services that offer more flexibility, shying away from systems such as the BlackBerry that are fully controlled by Research In Motion, said Gartner Inc. analyst Phillip Redman. Customers using Apple's iPhone or handsets with Microsoft's Windows have more control over the servers and software that run their e-mail systems.

"We see quite a bit of growth for Windows Mobile e-mail," said Redman, who is based in Boston and lost his BlackBerry access Monday. "If BlackBerry service outages become more frequent, then that growth could accelerate."

At stake is Research In Motion's share of the smart-phone market, where sales expanded 72 percent worldwide last quarter to 35.5 million devices, according to Reading, England-based researcher Canalys. That compares with 13 percent growth for the total mobile-phone market.

Research In Motion, based in Waterloo, Ontario, fell $2.97 to $91.50

The failure occurred about 3:30 p.m. Monday and was fixed three hours later, Research In Motion said in a statement. No messages were lost, and calling and text-messaging services weren't affected.

"Obviously, the important thing is that it was fully restored quickly," Balsillie, 47, said. "It was pretty focused and isolated and we recovered well."

An upgrade to Research In Motion's network operation center caused the problem, The Wall Street Journal reported.

The company said Tuesday that it's continuing to investigate.
Research In Motion has won customers because its system is seen as the most reliable and secure by information-technology managers, said Morgan Keegan & Co. analyst Tavis McCourt in Nashville. Although brief service glitches probably won't curb Research In Motion's growth, frequent shutdowns may alienate users, he said.

Make It Work, a Santa Barbara, Calif.-based computer support provider, said all its employees, including 60 field technicians, faced BlackBerry problems. Although the company has considered switching to the iPhone and Palm's Treo, the disruption is bearable, Chief Executive Officer Eric David Greenspan said.

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