BlackBerry E-mail Outage Upsets White House, Wall Street

Users of the hand-held BlackBerry e-mail device, a communications lifeline for movers and shakers from the White House to Wall Street, endured hours of disrupted service before the system was restored on Wednesday.

White House spokesman Tony Fratto opened a morning briefing with reporters by apologizing for missed e-mails. "I think we're 14 hours into no BlackBerrys. So you can imagine how things
are over there," he said.

At the U.S. Capitol, where lawmakers and staffers rely on the BlackBerry to keep plugged into shifting legislative and political battles, the outage was crippling. "I felt like my left arm had been amputated," said Joe Shoemaker, communications director for Assistant Senate Democratic Leader Dick Durbin of Illinois.

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[RIMM  Loading...      ()   ], the Canadian maker of the pocket-sized gadget, said it was looking into what caused the disruption that began Tuesday night and affected users in North America.

RIM has about eight million subscribers who use various models of its BlackBerry, which has become a staple with lawyers, politicians, company executives and other professionals. The United States is its biggest market.

Without giving details, RIM, based in Waterloo, Ontario, said e-mail service was "delayed or intermittent," but phone calls were not disrupted.

"Analysts are speculating that at some point new subscriber sign-ups hit some sort of tipping point and the system was simply unable to handle all the new traffic," CNBC's Jim Goldman said.

Charles Ross, a criminal defense lawyer in New York, said the outage left him feeling "vulnerable and uncomfortable," and caused him to miss a breakfast appointment with a colleague. "He did not show and had sent me an e-mail that he wasn't able to make it," Ross said. "It just shows me how dependent we are on these mobile devices."

One Wall Street analyst said she kept hitting her BlackBerry's version of a "refresh" button, not believing that the system could fail. "I have a client that would have paid me with an immediate trade but they couldn't reach their trader because BlackBerry service was down," she said.

In the real estate industry, top brokers are more likely to "BlackBerry" a client or colleague than call by cell phone. "If you don't respond to somebody via BlackBerry within an hour, or an hour
and a half, you're ignoring them," and risk losing their business, said Darren Sukenik, executive vice president of luxury sales at Prudential Douglas Elliman.

Problems with BlackBerry service forced users to cope without on-the-go e-mail access, but some also saw a silver lining -- free time to relax.

"I was trying to conduct business with my BlackBerry last evening, but once I realized it didn't work I could sit down and enjoy the Rangers game and the Mets game," said William Hickey, co-head of investment banking at Sandler O'Neill & Partners in New York.
    
It's All About The Technology

But the glitch raised questions for users and investors.

The outage illustrates "a technical issue that the company does need to deal with," said Carmi Levy, a senior research analyst with Info-Tech Research Group. "They need to look at their architecture long-term and ... ask some very hard questions about whether their current network is strong enough and big enough to support the kind of subscriber growth that they're seeking," he said.

RIM added 1.02 million BlackBerry subscribers in the fourth quarter alone, and expects to add another 1.125 million to 1.15 million in the quarter to June 2.

Nick Agostino, an analyst at Research Capital in Toronto, said naysayers were "just overblowing the whole situation," citing RIM's strong track record of stable service. He noted that European service was not affected.

The Blackberry outage also comes at a time when competition in the smartphone segment is escalating ahead of Apple's launch of the iPhone.

RIM's shares initially fell on news of the outage. The often-volatile stock, which regularly loses or gains between 1% and 3% in a session, ended up $3.10, or 2.4%, at $134.37 on Nasdaq. On the Toronto Stock Exchange, it closed up C$2.95, or 2%, at C$151.77.
    
Other Problems

RIM said this month it was facing a formal investigation by the U.S. Securities and Exchange Commission over historical stock-option grants. The SEC earlier had been conducting an informal inquiry.

Investors also dumped its shares after fourth-quarter results which met, but did not exceed, expectations.

RIM is still working to get its financial filings up to date following a $250 million earnings restatement related to mistakes in how it granted stock options in the past. Jim Balsillie, the company's co-CEO, gave up his dual role as the company's chairman when the restatement was disclosed.