BlackBerry outage adds more skepticism of RIM
Research In Motion's reputation, and its shares, took another hit on Friday after the BlackBerry maker suffered an embarrassing service outage, the same day that Apple's new iPhone launched in stores.
Analysts were quick to note the bad timing of the outage on three continents, but they also said it's another reason to doubt RIM's ability to stay competitive in the demanding smartphone market.
"Oh, the irony of that," said William Blair & Co. telecom analyst Anil Doradla.
"This is not a piece of news that they can afford, they need or they want at this time," said Doradla, who's based in Chicago.
RIM's next-generation BlackBerry 10 smartphones won't make their debut until early next year, missing this year's holiday sales season. The new phones were supposed to launch last year giving the Waterloo, Ont., company few new products to sell.
"With every passing quarter that they delay the launch of the new product, they continue to lose market share," Doradla said.
The BlackBerry outage affected email and text users in Europe, the Middle East and Africa for a maximum of three hours, RIM chief executive Thorsten Heins said in a statement.
"I want to apologize to those BlackBerry customers in Europe and Africa who experienced an impact in their quality of service earlier this morning," Heins said.
Heins, who noted no data or messages were lost, said RIM was looking into the problem and would report the results of its investigation.
Up to six per cent of RIM's user base may have been impacted, Heins estimated.
"Preliminary analysis suggests that those customers may have experienced a maximum delay of three hours in the delivery and reception of their messages," he said.
RIM announced the BlackBerry outage in postings on Facebook and Twitter before the business day got fully under way in North America.
Shares in Research In Motion narrowly missed hitting a new one-year low on Friday. Shares were down 7.4 per cent, or 50 cents, closing at $6.25, coming within a penny of a 52-week low of $6.24 set on Sept. 6.
The stock has taken a beating as RIM's product lineup falls behind rival products, particularly the iPhones from Apple and Galaxy devices from Samsung.
RIM has been making cuts across its operations to help counter faltering sales of its smartphones, particularly in North America. The company announced 5,000 layoffs earlier this year.
The outage also brought up unpleasant memories of troubles with email and chat messages last year that left millions of users globally without service for three days. At that time, RIM was criticized for being slow to respond publicly to the outage.
Edward Jones technology analyst Bill Kreher said consumers may decide the new BlackBerry 10 smartphones aren't worth the wait.
"This outage comes at a bad time, given the already negative sentiment," Kreher said from St. Louis. Mo.
"In the minds of consumers on the same day the iPhone is launched, you're getting further negative perception around the BlackBerry product and services," he said.
Marketing professor John Pliniussen said the timing of the outage couldn't have been worse for RIM.
"It's sweet apples and sour berries on the same day," said Pliniussen, who teaches at Queen's University in Kingston, Ont.
"It's just ironic." he said. "Of all the bad luck."
In most geographic areas, RIM will no longer be able to compete with iPhones or smartphones using Google's Android operating system, which he called the "godzilla" of platforms.
Doradla said the new BlackBerry smartphones won't surpass the new iPhone 5 or smartphones running Google's Android operating system.
"If it catches up to what is out there, I will be impressed."
He also said RIM could experience further outages because the company routes all of the traffic through its servers, which are getting more and more taxed with data.
"It is a bottleneck," Doradla said.
"This will continue happening, I think. The issue is with their lack of dollars, their lack of money, can they continue investing in this infrastructure. That's the bigger problem."
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