Blackberry faces call for break up after systems jam

13th October 2011

The firm is also facing calls for compensation from disgruntled business people and freelancers who say they have lost money as a result of the failure of the messaging and emails systems. The problems centre on Blackberry's Slough operation, with the UK worst affected, but by yesterday key markets such as the US and Japan were also seeing disruption.

Ironically perhaps, Blackberry's problems stem from the fact that it runs its own messaging systems. This allows it to add more security features, a key reason its systems appeal to business people, but this has also left it vulnerable to internal systems problems.

By this morning however, the BBC was reporting that many systems were back up and running and RIM had began the process of explanation and apology.

Robin Bienfait, chief information officer of RIM said: "You've depended on us for reliable, real-time communications, and right now we're letting you down. We are taking this very seriously and have people around the world working around the clock to address this situation. We believe we understand why this happened and we are working to restore normal service levels in all markets as quickly as we can."

But now fundamental questions are being asked about the strategy of the firm.

On Twitter, computer entrepreneur Alan Sugar tweeted: "In all my years in IT biz, I have never seen such an outage as experienced by BlackBerry. I can't understand why it's taking so long to fix. All my companies use [BlackBerry phones], every one so reliant on getting email on the move, people don't know if they are coming or going."

Now Canadian merchant bank Jaguar Investment Corporation, a firm which claims to speak 12 of the 20 largest shareholders in RIM has called for the company to be broken up and the company's co-CEOs to step down.

The Mailonline quotes Vic Alboini, Jaguar's chairman and chief executive, saying: ''Their time as builders is over. Management has failed to appreciate RIM's competitive environment, which largely explains RIM's declining market presence and dramatically reduced share price. RIM has become a reactionary company trying to compete in an innovative industry."

As Bloomberg reports, Jaguar is gathering support from other shareholders for the recruitment of a new CEO. And the firm has some track record as an activist shareholder in Canada. In 2009, Hudbay Minerals Inc agreed to cancel its C$672 million ($534 million) takeover of Lundin Mining Corp after Jaguar's Alboini rallied shareholders to oppose the bid.  

Others are now asking fundamental questions.

Canadian website the Star asks can Blackberry's reputation survive this crash.

It quotes Canada Marketing Magazine editor-in-chief Tom Gierasimczuk who says that fast, encrypted, reliable messaging made Blackberry the phone of choice for business.

"It really fundamentally undercuts one of their few remaining brand promises. What are users left with now?"

In a note to investors yesterday, RBC Capital Markets analyst Mike Abramsky and associate Paul Treiber said customer anger generated by the outages could drive some consumers to consider buying smartphones from Android or Apple.

Technewsworld asks it Blackberry has sustained a black eye or received a knock out blow.

It quotes Craig Mathias, a principal at the US based Farpoint Group and a mobile communications expert at Focus.com, though he does think RIM will survive.

"It's a black eye for the company both technically and from the financial perspective, but people have short memories, and switching from one IT system to another is not a simple matter. I'm one of the rare analysts who believe RIM will survive. They have a huge installed base that's not going away any time soon."

Of course, it is not only RIM and Blackberry facing problems. Even Apple has proved fallible this week as Tech Crunch reports that users trying to upgrade their Apple phones and tablets this week to iOS 5 system are facing big problems due to traffic.

Then again, no one is calling for Apple to be broken up.

More from Mindful Money:

Apple: More money than the US government

Apple: Security concerns for servers

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