Investor's Business Daily, April 18th, 2007
A malfunction at Research in Motion temporarily knocked out e-mail and text-message service for nearly 8 million BlackBerry users who connect through cellular carriers in North America, Europe and Asia.
The blackout began sometime Tuesday evening, and service didn't resume until Wednesday morning. It was one of the worst outages among several that have dogged RIM's RIMM communications network in recent years.
"Clearly something catastrophic happened," said mobile technology consultant Jack Gold of J. Gold Associates. "It's absolutely causing disruptions. A lot of businesses are highly dependent on BlackBerrys."
RIM has defined itself not only for its devices, but also for its mobile "push" e-mail service, which delivers messages automatically instead of making users download e-mail manually.
A single network operating center in its hometown of Waterloo, Ontario, connects corporate e-mail servers to cellular networks. Problems at the network center cause outages from time to time, but most aren't severe.
Thomas Smith of funeral services provider Service Corporation International SCI knew something was wrong when he checked his BlackBerry on Wednesday morning and had no e-mail.
"I usually get 200-300 e-mails a day and I didn't have a single one," said Smith, an information technology manager.
Roughly 500 SCI employees use BlackBerrys. Smith said the outage may have prevented salespeople from reaching customers, or financial executives from receiving updates on the company's stock.
"We never find out anything about what causes outages," Smith said. "It's kind of frustrating."
After service was restored on most cellular networks Wednesday morning, RIM released a statement saying it had restored most service overnight but was still trying to determine what caused the problem.
The outage comes on the heels of a second-quarter financial report that disappointed investors.
Analysts had set high hopes as sales of RIM's consumer-oriented Pearl broadened the company's base beyond power users such as executives and government officials.
Before the earnings report, RIM's stock price had almost doubled since it resolved a patent dispute that threatened to shut down service. Despite the outage, shares rose more than 2% on Wednesday to around 134.
"RIM needs to show that this is an isolated event and it can deliver a robust messaging service no matter how large its subscriber base becomes," said Carmi Levy, an analyst with research firm Info-Tech .
Mass defections to rival products are unlikely, says J. Gold Associates' Gold. In a study published last year, he estimated that switching to another device would cost companies about $845 per user when accounting for new hardware, training and software.
Info-Tech's Levy said RIM needs to show that it is putting together a plan to reduce the likelihood and severity of service outages.
In the short term, this may involve adding backup systems to the existing network operating center. In the long term, RIM may need to set up more operating centers.
But ultimately, service interruptions may be unavoidable.
"No technology is perfect and no company is perfect," said Levy. "What's important is to show a concrete response to system failure."
