Bloomberg News

BlackBerry Bumped as U.S. Procurement Agency Issues IPhones

February 21, 2012

(Updates with comment from analyst in fourth paragraph.)

Feb. 14 (Bloomberg) -- Research In Motion Ltd.’s once- dominant position in Washington took another knock with the decision by the U.S. government’s main procurement agency to begin issuing iPhones alongside BlackBerrys.

The General Services Administration, with 12,635 employees, procures more than $70 billion worth of products and services for other federal agencies a year. GSA staff may now request Apple Inc. phones and devices running Google Inc.’s Android software if they have applications that can help them work more efficiently with customers like the Departments of Justice and Homeland Security, said Deborah Ruiz, a GSA spokeswoman. She didn’t say when the change took effect.

The move highlights the challenge facing Thorsten Heins, RIM’s new chief executive officer, who has vowed to rethink the way the company markets and sells BlackBerrys to reverse slumping demand. The policy change by GSA, a central provider of products and services including communications equipment, may make it easier for other federal agencies to also approve the iPhone, said Roger Entner, an analyst at Recon Analytics LLC.

“It’s the canary in the coal mine because now every government body or institution can follow suit,” Entner, who is based in Dedham, Massachusetts, said in a phone interview.

RIM said in an e-mailed statement it continues to work closely with its more than 1 million government customers. The company said the new BlackBerry 7 operating system has been certified by the U.S. government’s National Institute of Standards and Technology and its PlayBook device is the only tablet certified for use by U.S. government agencies.

U.S. Plunge

RIM’s sales in the U.S. fell 45 percent last quarter as consumers and businesses opted for iPhones or Android devices for their better Web browsers and wider array of apps.

The U.S. decline is dragging down RIM’s global market share even as sales in emerging markets like India and Indonesia climb. RIM’s share of the worldwide smartphone market slid to 8.2 percent in the fourth quarter from 14 percent a year earlier, while Apple’s share rose to 24 percent from 16 percent in the same period, according to research firm IDC.

The sales drop has led to a 90 percent plunge in Waterloo, Ontario-based RIM’s share price from its 2008 high. RIM fell 2.2 percent to $14.57 at the close in New York. Shares of Cupertino, California-based Apple gained 1.4 percent to $509.46.

Approved Devices

The U.S. National Oceanic and Atmospheric Administration said last week it would support BlackBerrys until May and then begin replacing them with iPhones. Apple’s devices can be integrated into its current infrastructure more cheaply than paying for a dedicated BlackBerry server, said Joe Klimavicz, chief information officer of the the weather, ocean and fisheries research agency with 13,000 workers.

Halliburton Co., the world’s second-largest oilfield- services provider, said last week it will phase out 4,500 BlackBerrys and switch to the iPhone because the Apple device does a better job of supporting internal company applications like software to monitor well construction.

The GSA, which also manages office buildings for more than a million federal employees across the U.S., picks suppliers and negotiates prices for more than 12 million products and services ranging from consulting contracts to office supplies and laboratory equipment.

The Washington-based agency will continue to issue BlackBerrys alongside other devices and allow employees to choose their own device from an approved list, Ruiz said. The agency has no plans to support employees’ own devices, a policy adopted by some companies seeking to reduce costs.

Ruiz didn’t say how many smartphones the GSA issues to employees or what the breakdown is by type of device.

--With assistance from Kathleen Miller in Washington. Editors: Ville Heiskanen, John Lear

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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