Bloomberg News

BlackBerry Service Resumes After North America Outage

February 12, 2008

A network breakdown disrupted BlackBerry e-mail service for about 8 million North American customers yesterday, the biggest failure for Research In Motion Inc. (RIMM:US) in 10 months.

All U.S. carriers were affected, according to AT&T Inc. and Verizon Wireless, the two-largest mobile-phone companies. AT&T spokesman Mark Siegel said at 6:45 p.m. New York time that service had been restored.

Research In Motion has about 12 million subscribers worldwide, including Wall Street bankers, members of the U.S. Congress and President George W. Bush. The disruption may prompt executives in charge of information-technology budgets to consider competitors' services, said Avi Greengart, an analyst at market researcher Current Analysis Inc. in Washington.

``If they weren't goaded into action last time, there's no question that IT managers are going to be looking for alternatives now,'' Greengart said in an interview from Barcelona.

The disruption follows a failure in April, when BlackBerry users faced message delays and glitches in Internet access. The company said a malfunction in newly installed software caused the problems that time.

Research In Motion fell $2.97, or 3.1 percent, to $91.50 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has more than doubled in the past 12 months.

Service Delays

A data service interruption caused ``intermittent service delays'' in North America, Research In Motion said in an e- mailed statement. The company, based in Waterloo, Ontario, said users couldn't send or receive messages or browse the Web.

``Obviously, the important thing is that it was fully restored quickly,'' James Balsillie, co-chief executive officer of Research In Motion, said in a Bloomberg Television interview. ``It was pretty focused and isolated and we recovered well.''

No messages were lost, said Balsillie, who spoke today from Barcelona, where he was attending the Mobile World Congress industry conference.

Asked about the costs of the service interruption, Balsillie said the ``relevant issue'' of such incidents is the reputation of the company and its relationship with customers.

Competitors

AT&T, the largest wireless carrier in the U.S., learned of the interruption from Research In Motion at 3:30 p.m. New York time, spokesman Fletcher Cook said yesterday. Verizon Wireless, the No. 2 mobile carrier, also confirmed the disruption.

Research In Motion needed to fix the problem quickly to prevent rivals from capitalizing on the outage, said Morgan Keegan & Co. analyst Tavis McCourt, who lost his BlackBerry service in Nashville, Tennessee. Nokia Oyj and Motorola Inc. introduced new devices and have acquired e-mail service providers in the past three years to challenge Research In Motion.

Research In Motion's share of the worldwide market for advanced phones climbed to 11.4 percent in the fourth quarter, up from 8.9 percent a year earlier, according to Canalys, a market research firm in Reading, England. Market leader Nokia Oyj (NOK1V) lost ground, with its share dropping to 52.9 percent from 53.8 percent.

`BlackBerry Thumb'

BlackBerry owners use their devices so frequently that they're developing their own syndromes, Current Analysis's Greengart said. Soreness from typing is called ``BlackBerry thumb.'' A ``phantom BlackBerry'' is the sensation of vibration when users aren't actually carrying the device, he said.

Balsillie said the company's business is growing ``incredibly well'' because of demand for its products even as there is turmoil in the credit markets and the U.S. economy slows.

``This is an emerging space, it's rapidly evolving and we're not really a bellwether of the economy,'' he said. The growth ``fully supports the sort of burgeoning opportunity in the sector and China is certainly part of that.''

Asked about the demand from companies for new models such as the BlackBerry 8800 that was introduced last year, Balsillie said ``corporate adoption is still very strong.'' He said the company benefits as customers want devices to increase productivity in times of economic pressure.

-- With reporting by Lori Rothman in New York, Chiara Remondini in Barcelona and Simon Thiel in London. Editors: Jonathan Thaw, Phil Serafino.

To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net Crayton Harrison in Dallas at tharrison5@bloomberg.net

To contact the editor responsible for this story: Cesca Antonelli at fantonelli@bloomberg.net.


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