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BlackBerry Blackout!

Wednesday, 18 Apr 2007 | 11:08 AM ET
AP

If you went to bed and woke up this morning thinking the world was quiet and that today was going to be a light day at the office, you may want to call in, instead of relying on your BlackBerry.

Research in Motion confirms a massive, system wide blackout affecting all its 8 million subscribers that began around 8 p.m. ET Tuesday, and while service is being restored, it is still sporadic and may take much of the day to get back on line completely.

For BlackBerry users, dubbed "crackberries" because of their addiction to the device and the technology, it's the worst possible news they could imagine.

Research in Motion did release a statement this morning to NBC News, saying "A service interruption occurred Tuesday night that affected BlackBerry in North America. Email delivery was delayed or intermittent during the service interruption. Phone service on BlackBerry handsets was unaffected. Root cause is currently under review, but service for most customers was restored overnight and RIM is closely monitoring systems in order to maintain normal service levels."

That's a far cry from the reception CNBC got when we finally connected with a rep from the company's public relations firm Brodeur Partners last night as the outage drama was unfolding. She was annoyed that we had reached her at home, clearly not appreciating the magnitude of the meltdown.

For Research in Motion, the outage may be winding down, but the shaken confidence could resonate for some time. In its earnings report last week, RIM said it had signed up more than 1 million new subscribers last quarter, and now expects to sign well over a 1 million more this quarter. The concern, of course, is that the company simply cannot accommodate the significant growth the company had been enjoying; and the massive momentum that contributed to a share price that has more than doubled over the past year. Now, there will be questions as to whether growth-model projections ought to be revised if there are concerns that the company can't handle the new subscriptions.

James Faucette at Pacific Crest Securities tells CNBC this morning that he maintains his "buy" rating on the stock and his $160 price target. Mike Ambramsky from RBC Capital tells us he maintains his $180 target. Says Ittai Kidron from CIBC World Markets says, "I don't think it is too material the company has had these outages in the past and it really didn't impact the company's business so this was fixed pretty quickly by the company I don't see this as a major issue."

RIM shares took an early, 3% hit from all this but have recovered much of those losses as word of the system fix begins to grab headlines.

But this could be just the ticket for so many wireless competitors looking for a leg up against the RIM juggernaut. Companies like Palm, Motorola, Nokia and even Apple Inc. and its upcoming iPhone can use this kind of service disruption as a key competitive difference since their handsets work on different technology.

"I'm sure they'll try to use the headline in their advantage but I think that the reality is that RIM's platform has been a very stable one for a long, long time and a proven one. And therefore while the hiccup certainly doesn’t help their credibility I don’t think it materially undermines their customers' perspective. I don't think competitively anything has changed here."

And RBC's Abramsky brings up a good point: "It does reflect the 'vitalness' of RIM to its users and the economy and its enormous role they play in communication. It is.... no different than a power grid going down to some extent. When you're a company that central to communication, it does add to the impact."

That's not to say that RIM isn't taking its role seriously. The BlackBerry is almost ubiquitous for so many businesses nowadays; during the company's contentious patent dispute with NTP last year, when an injunction was looming over the company's head, the U.S. Justice Department asked the courts for a special exemption so Federal attorneys and investigators' BlackBerrys would continue to operate. The outage just goes to show that there are still serious reliability issues with wireless, and that the technology hasn't quite caught up to the reliance we all put it in.

Just as an aside: the BlackBerry outage occurred on "American Idol"'s voting night! Not sure how many fans text in their votes on the BlackBerry, but wow! Timing is everything! Text and SMS were affected as well, though not to the same degree as email, meaning some of those messages may have gone through, but they also may have endured lengthy delays. Poor Sanjaya.

Meantime, the RIM outage is a not-so-gentle reminder that "reliability" and wireless don't necessarily go hand in hand, all the time.

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