BlackBerry outage not in RIM's favor

update "Tough" week for Research In Motion which suffered major outages that affected millions of users, notes analyst, who says RIM cannot afford to be deemed unreliable amid increasing market competition.
Written by Eileen Yu, Senior Contributing Editor

update Things are not working in its favor as Research In Motion (RIM) continues to struggle with major network outages and intensifying competition in the smartphone market, according to research firm Frost & Sullivan.

In a statement late-Wednesday, analyst for ICT practice Craig Cartier said it has been "a tough start to the week" for the device maker which saw a second major outage that brought down its e-mail, messaging and Web services.

Over 10 million customers in Europe, the Middle East, parts of South America and Africa were affected by the outage which began Monday, resulting in limited access to Web browsing and messaging services including BlackBerry Messenger. While RIM said it had resolved the problem, millions of its subscribers were still unable to regain full access to their services.

Its CIO Robin Bienfait posted a statement on the company's Web site, apologizing for the outages: "You've depended on us for reliable, real-time communications, and right now we're letting you down. We are taking this very seriously and have people around the world working around the clock to address this situation. We believe we understand why this happened and we are working to restore normal service levels in all markets as quickly as we can."

Cartier said: "The timing of these events does not work to RIM's favor. As Apple and Android smartphones continue to cut into RIM's market share and enterprise players begin to see those manufacturers as viable alternatives, RIM can ill-afford the questions to the company's reliability that the present outage brings.

Nick Dillon, analyst for devices and platforms at Ovum, concurred, noting in a statement that the service outage was "unfortunate" since the company had more important and wider issues to resolve. These, he said, included identifying ways to capitalize on the consumer market growth and maintain its stronghold in the enterprise space, as well as updating its software platform to keep up with competition from Apple, Android and Windows Phone.

Dillon noted that RIM CTO David Yach had explained that the service outage affecting North America were not due to further network failures but from a backlog of e-mail traffic from the Europe, Middle East and Africa region. "While this may be little consolation to users, it does allay fears that the problems might be more widespread than first thought," the Ovum analyst said.

Noting that RIM also suffered a major service disruption in 2009 during which users reported problems accessing their e-mail, he said its BlackBerry user base had since doubled. He added that the sustained downtime this week would once again put into question the company's reliance on its centralized network architecture.

The analyst noted the "significant risk" of the network, despite the benefits it offered with the real-time delivery of e-mail and data efficiency. "The widely reported issues that users have been experiencing with the Apple iOS 5 update process further illustrate how no system is flawless.

"Given that the reputation of the BlackBerry service is built upon reliability and timeliness, any disruption to its service will undoubtedly impact the perception of the company and its products to a greater extent than its competitors. It is a testament to the success and ubiquity of the BlackBerry service how widely this disruption is being felt, both across business and consumer users," Dillon said.

Focus should be on competition
Cartier noted that while RIM had been a leader in the smartphone market, specifically in the enterprise realm due to its strengths in messaging, this space was seeing increasing competition with the likes of HTC, Apple, Samsung, among others.

"Unfortunately for RIM, the messaging platform has become less of a differentiator than in the past, and users are looking more to intuitive user interface designs and wide availability of strong applications--two areas where RIM has lagged," he explained.

He added that employees now wanted more choice in their enterprise devices, driving organizations to consider alternatives to RIM.

The Frost & Sullivan analyst noted that the BlackBerry maker had taken steps to keep up with the competition, specifically, through its acquisition of The Astonishing Tribe which it said would improve user interface, as well as its buyout of the QNX platform which was used in its Playbook tablet and planned for use in future smartphones.

However, while Cartier said these reflected improvements in key areas, he questioned if the moves were too little, too late.

"Despite RIM's recent stumbles, they do maintain a strong and in some cases, very loyal following, particularly in the enterprise space. And some feel that the stock has taken a deeper hit than warranted and therefore, may be a prime acquisition target for a larger player," he noted.

"Questions remain at the willingness of co-founder Mike Lazaridis to part with the company he built and still serve as CEO, however. Time will tell the response of RIM and their ability to cope with this outage; among their host of other challenges."

Industry analysts last week said RIM made for an attractive takeover as the company's stock had tumbled 71 percent since February. Last month, its shares rose 7 percent on speculation that investor Carl Icahn might be interested in taking a stake in the company.

RIM on Monday announced plans to acquire Irish mobile software maker, NewBay, in a bid to build up its content offerings.

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