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India's Offensive a 'Real Problem' for RIM: Analyst

CNBC.com
Friday, 13 Aug 2010 | 2:54 AM ET

India's demands to gain access to BlackBerry's encrypted content is a "real problem" for smartphone maker Research In Motion(RIM), said Rob Enderle, principal analyst at Enderle Group.

India Ultimatum a 'Real Problem' for RIM
India's demand for encryption access is a "real problem" for Research in Motion, says Rob Enderle, principal analyst at Enderle Group. He shares his thoughts on the situation, with CNBC's Martin Soong & Karen Tso.

"They could be forced out of government accounts, defense accounts, health care accounts (and) large corporate accounts, including petrochemicals," Enderle said on CNBC Friday.

"It would not be a good end."

The Indian government has threatened to shut down the BlackBerry email and instant messaging servicesrunning through their networks, if the Canadian smartphone maker fails to provide a "technical solution" by August 31.

The bigger problem for RIM lies in the fact that it does not actually hold the encryption keys, Enderle said.

"They don't have access to the keys.. at least they've said they don't have access to the keys the customers generate. And if they do, they've been misrepresenting security for quite some time," he noted.

The Indian demands follow a deal with Saudi Arabia, where a source said Research In Motion agreed to give authorities codes for BlackBerry Messenger instant messaging users. The United Arab Emirates, Lebanon and Algeria are also seeking access.

Blackberry Torch 9800
Source: blackberry.com
Blackberry Torch 9800

A shutdown in India would affect one million of the smartphone's 41 million users. The country may target Google and Skype next after BlackBerry, the Financial Times reported.

"It's unlikely these various governments are going to be able to go after every single encryption provider and get the keys, especially given that most of them, like BlackBerry, let you generate your own keys and (they) don't have access to them in the first place," he added.

Will RIM Get Torched?

Enderle said RIM has done a relatively poor marketing campaign around its latest device, the Torch, touted as an iPhone killer, saying it is a repeat of Palm's mistakes.

"Right now, I'm very concerned about RIM's executive leadership and how they are responding to what clearly is a difficult time for them...They can start bleeding very, very deeply and fast, if they start losing some of these big accounts," he warned.

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