RIM scrambles to end BlackBerry outage

Research In Motion said on Wednesday it was working frantically to end a three-day global disruption of BlackBerry services that has frustrated millions of smartphone users and put more pressure on the company for sweeping changes.

The Canadian company, in a hastily announced conference call, vowed to deliver all email and instant messages to the tens of millions of customers who have been affected by the outage. It later told some clients the huge backlog may not clear until Thursday morning on the East Coast.

Think of it like a dam and the water is the data, said Jefferies analyst Peter Misek. Once the dam bursts it's really difficult to get the water back behind the dam. That's what they're attempting to do right now.

Shares of RIM dropped 3.9 percent in Toronto trade after the late-afternoon call, which RIM arranged days after the disruptions began in Europe, the Middle East, Africa and India. The outage later spread to the Americas.

Even though the drop in RIM's share price was relatively modest, the stock has already tumbled more than 50 percent since the beginning of the year after a series of profit warnings, product missteps and little hope of an early turnaround.

This week's disruption, the worst since an outage swept North America two years ago, is likely to fuel calls for a management shake-up and a possible sale or split of the company, which has failed to keep pace with Apple and other rivals in a rapidly changing market.

The troubles could damage RIM's once-sterling reputation for secure and reliable message delivery and risks a further devaluation of its proprietary BlackBerry offering.

Our priority is to get the service up and running, because at the end of the day what's going to make our customers happy is to have their BlackBerrys working again, David Yach, RIM's chief technology officer for software, said during the call.

UNIQUE SYSTEM

RIM is unique among handset makers, as it compresses and encrypts data before pushing it to BlackBerry devices via carrier networks. Apple and others rely on the carrier networks to handle all routing and delivery of content.

But even before this week's disruptions, many companies had started to balk at paying a premium to be locked into RIM's secure email service. Some are allowing employees to use alternative smartphones, particularly Apple's iPhone, for corporate mail.

It's a blow upon a bruise. It comes at a bad time, said Richard Windsor, global technology specialist at Nomura.

One possibility could be that it encourages client companies to look more at other options such as allowing users to connect their own devices to the corporate server and save themselves the cost of buying everyone a BlackBerry.

At the same time, RIM is getting ready to shift its line of BlackBerry smartphones to new software first used in the poorly received PlayBook tablet. A successful transition is considered crucial for its efforts to regain market share as the iPhone and devices powered by Google's Android become ever more popular with consumers.

The service disruptions prompted BlackBerry users to vent their frustration at the company and what they said was its failure to keep its customers informed.

Totally appalled at the lack of communication from RIM, wrote Lynn Murdoch on RIM's BlackBerry Facebook page. Love my Berry, but furious at the fact that no one can actually give a time frame of how long its going to take to fix. Utterly disappointed!

I'm right at the edge where I might be saying goodbye to my BlackBerry, said Tony Vitali, a BlackBerry user in New York. The device freezes twice a day. ... It's a very frustrating device.

BAD TIMING

From a marketing standpoint, the timing could hardly have been worse for RIM.

Apple on Wednesday launched an major upgrade to its iOS operating system that includes iMessage, an instant messaging service for users of Apple's iPhones, iPads and some iPods that is a direct competitor to RIM's BlackBerry Messenger, or BBM.

The service, which allows BlackBerry users to send free text messages to other BlackBerry users, has made the devices a popular choices with young consumers. That has partially compensated for its losses in the corporate market in North America and Western Europe.

RBC Capital Markets analysts Mike Abramsky and Paul Treiber said the latest crisis could hurt RIM's reputation in these key markets, particularly after high-profile tussles with jurisdictions whose governments demanded access to encrypted communications for security reasons.