Bloomberg News

RIM Says Sales to U.S. Government Are Rising

April 09, 2012

Research In Motion Ltd. (RIM) BlackBerry signage hangs above the company's booth at the 2012 International Consumer Electronics Show (CES) in Las Vegas. Photographer: Daniel Acker/Bloomberg

Research In Motion Ltd. (RIM) BlackBerry signage hangs above the company's booth at the 2012 International Consumer Electronics Show (CES) in Las Vegas. Photographer: Daniel Acker/Bloomberg

Research In Motion Ltd. (RIM) said sales to U.S. federal agencies are rising and the BlackBerry is still a White House fixture, a bright spot for a company struggling with plunging demand amid competition from the iPhone.

The company’s share of the government market is probably increasing, Scott Totzke, senior vice president of BlackBerry security, said in an April 5 interview in Washington. He declined to say whether President Barack Obama is still a user, though he said the White House is a “strategic” customer.

RIM is clinging to the government business as one of its last North American strongholds as consumers and businesses switch to rival devices with bigger touch screens and faster browsers. Sales in the U.S. (RIMM:US), still RIM’s biggest market, fell 57 percent last quarter, in part because Apple Inc. (AAPL:US) iPhones and devices running Google Inc. (GOOG:US)’s Android software are proliferating in the workplace.

“Compared to the enterprise over the last year and a half or so, the federal business on whole is up,” said Totzke, who also runs RIM’s U.S. government sales business. “The employee base is shrinking, so if we’re looking at a market with fewer employees and our install base is stable to slightly up, that would seem to indicate that we have an increasing market share.”

Obama insisted on keeping his BlackBerry when he became president, and Totzke was in the U.S. capital touting the smartphone’s encryption and other security features to persuade more federal workers to adopt or stick with the device. To save money and administrative hassle, some agencies have started allowing employees to use their own iPhones and Android phones for work.

Reclaiming the Market

RIM Chief Executive Officer Thorsten Heins on March 29 acknowledged the BlackBerry maker was late to embrace the bring- your-own-device trend and vowed to “reclaim” market share lost to rivals.

RIM will make a “significant investment” in promotions in the Washington area in coming weeks to drum up awareness of what new BlackBerry 7 phones offer, including better Web browsing and touch-screen navigation, Totzke said.

“We need to help customers understand what is possible” with the devices, said Totzke, who joined Waterloo, Ontario- based RIM in 2001 and previously worked at Electronic Data Systems Corp., the company founded by billionaire Ross Perot.

RIM fell (RIMM:US) 0.7 percent to $12.67 in New York trading on April 5. The stock has lost 77 percent in the past year.

Mobile Fusion

In an acknowledgment of inroads made by rivals, RIM last week released BlackBerry Mobile Fusion, software that lets organizations manage iPhones and Android devices alongside BlackBerrys on their networks. RIM plans to make BlackBerry Mobile Fusion the “major player” in mobile-device management in coming years, according to Totzke, who said he’s in Washington on business two to three times a month.

That doesn’t mean RIM won’t focus on hardware, Totzke said.

RIM sold 400,000 devices to the U.S. federal government in the past year as it won more business and existing clients upgraded to the newer BlackBerry 7 devices introduced in August and added BlackBerry servers, he said.

About 40 percent of RIM’s government customers upgraded to new devices in the past 12 months, he said.

“That’s a pretty good refresh rate,” Totzke said.

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Brendan McGarry in Washington at bmcgarry2@bloomberg.net

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


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