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Stock of the Day
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Research in Motion (RIMM)
BlackBerry Dials Up a Service Outage
Smart phones are slowly taking over the communication world one handset at a time. As the popularity of the smart phone has increased, so has the competition, just ask Research in Motion. The BlackBerry maker once ruled the smart phone realm with an iron fist, but lately it has been facing mounting pressure by other smart phone offerings, especially in the consumer segment. Apple, Google, Palm, and Motorola have all been making a huge push to secure a portion of the smart phone market. At the moment, BlackBerry still holds the top spot, but its recent slip-up may cause things to change. What did RIMM do that has the potential to tip the scales in favor of the competition?
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| Stock Analysis |
It was not what Research in Motion did, but rather what it failed to prevent. The BlackBerry manufacturer suffered an email and BlackBerry messenger outage that affected its North and South American users. Although the standard phone and text messaging functions worked, users were experiencing delays with emails and RIMM's in-network messaging tool. This is the second service outage for BlackBerry users in the last five days. It would be unrealistic to think that service lapses do not occur, but BlackBerry cannot afford a double offense right before Christmas.
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The holiday season is a prime time for smart phone unit sales. Although RIMM's service outage happened late in the seasonal rush, it may have been enough to push potential BlackBerry buyers away to the other offerings. Research in Motion has already been feeling the heat from the Apple iPhone, and the release of the Motorola Droid smart phone has only made the competition more intense. BlackBerry is seeing enough adversity in the smart phone market. It does not need multiple service outages to make things even more difficult. The long-term effects of the service failure will be hard to measure but Research in Motion is optimistic that they will be nominal. However, the competition is eagerly waiting to snatch up any of RIMM's dropped market share.
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Overall, BlackBerry is keeping its fingers crossed that these service outages are only minor blips on the consumer radar and that they will not impact holiday unit sales. However, RIMM should also be concerned with its current users. If these types of issues continue to occur, BlackBerry may need to start worrying about users dropping their contracts. It is unlikely that two temporary outages will cause an uprising in dropped BlackBerry plans, but RIMM needs to make sure that this does not happen again. BlackBerry generates a lot of revenue from its corporate contracts, and the business segment may not be as forgiving as the consumer segment. RIMM needs improve its network stability quickly before it starts hurting its brand image. Research in Motion is hoping that a little time and damage control will erase these incidents from the memory of both consumers and users alike.
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