Tags: RIM | shares | Apps | Offer

RIM Shares Shed 5 Percent After Apps Offer

Monday, 17 Oct 2011 12:46 PM

 

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Shares of Research In Motion dropped more than 5 percent on Monday after it sought to appease disgruntled BlackBerry customers by offering free apps and technical support to make up for last week's global smartphone outage.

Tens of millions of BlackBerry users were left without mobile email and other messaging for up to four days last week after a failure at a RIM data center in England triggered a service disruption across five continents.

RIM will offer premium apps worth more than $100 to customers and a month of technical support for businesses free of charge, hoping to stem fresh defections from the BlackBerry, whose market share was already shrinking before the incident.

Analysts have said RIM needs to quickly repair the damage to its image caused by the outage and stem the loss of corporate customers who are now questioning the reliability of the BlackBerry.

"RIM has responded swiftly but this won't undo the damage done to its reputation," analyst Geoff Blaber at CCS Insight told Reuters earlier on Monday. "This may go some way to appeasing customers but what's critical is that the problem does not repeat itself."

The stock was trading 5.1 percent lower at $22.75 on the Nasdaq by 11:30 a.m. It has shed more than 60 percent of its value since the start of the year.

The BlackBerry has in recent years lost market share to Apple Inc's iPhone and devices powered by Google's Android system. At the same time it has sought to make deeper inroads beyond its core corporate base, with a special focus on younger consumers and in emerging markets.

Highlighting the challenges, Apple said it sold 3 million of its new iPhone 4S in the first three days after launch last week.

"DEEPLY GRATEFUL"

RIM co-Chief Executive Jim Balsillie told Reuters on Monday the company wanted to make amends with customers.

"This is our way of expressing appreciation for their patience during the recent service disruptions and a tangible way of telling them how deeply grateful we are for their continued business," he said in a phone interview.

Balsillie declined to estimate how much the offer would cost RIM and said he was unable to say whether RIM might have to revise its earnings forecast for the current quarter, which ends in late November.

The financial impact could prove sizable if a large enough portion of RIM's more than 70 million subscribers take up the offers.

Balsillie said RIM was not running any tests on its network at the time of the failure and was still investigating the precise cause of the breakdown, the company's worst ever.

The free apps on offer include games such as Bejeweled, and premium versions of a translation service and the music discovery tool Shazam.

Richard Levick, who runs a U.S. consultancy that specializes in crisis management, praised the move but said the company should have made the announcement last week.

"I think it's a good start, but they are always late," he said. "They are always behind the curve."

Francisco Jeronimo, an analyst at IDC, had a different perspective on the offer. He said the decision was a clever move by RIM because it would help customers to discover the app service.

He said the company was likely to have struck a deal with app developers to keep the cost down.

"For RIM, this is an interesting way to attract users to the App World and incentivize them to search and download apps," he said.

"More important than the offer itself, is that RIM is showing goodwill and being humble. They recognized the problem, apologized and now they are compensating their users."

© 2014 Thomson/Reuters. All rights reserved.

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