Blackberry Manufacturer Faces Major Problems

After a major service outage this week, Research In Motion, or RIM, the company that makes Blackberries, faces major problems. The outage, which left millions of customers all over the world without service for up to three days, comes on the heels of a tablet flop and an embarrassing role in this summer's U.K. riots. Guy Raz talks with Chip Cummins of the Wall Street Journal about the future of the company.

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GUY RAZ, host: For at least three days, Blackberry Smartphone users around the world couldn't do much with their thumbs. A technical glitch shut down service and affected millions of Blackberry users. The problem has been fixed but it is very bad news for the Canadian company that makes the devices.

Earlier today, Mike Lazaridis, the founder of the company said in an online video that his goal has always been reliability.

MICHAEL LAZARIDIS: We did not deliver on that goal this week, not even close. I apologize for the service outages this week. We've let many of you down.

RAZ: So, will Blackberry users accept that apology or will this latest glitch sink the company? Chip Cummins from the Wall Street Journal joins us now. Welcome.

CHIP CUMMINS: Hi.

RAZ: Chip, the company that makes BlackBerry, Research in Motion, has already seen its stock price drop 60 percent this year, as more and more people are buying iPhones and Androids. Will we look back on this latest trouble and say this was the death knell?

CUMMINS: Well, it certainly came at the worst time possible for the company. You have a company that is fighting to stem a very rapid drop in market share in North America. That said, Blackberry has a very loyal following among corporate clients. And while it's very easy for someone like you or me to go and say I'm not going to use a Blackberry anymore, I'm going to go use an iPhone or one of the phones powered by Android, it's very, very difficult for a company with thousands of employees to do that.

RAZ: Chip, explain how this service outage actually happened?

CUMMINS: The company has given few specific details. But what we do know is RIM has a fairly unique network which it builds and maintains itself. That's seen as more secure. But when problems happen, there's not a lot of redundancy. What happened this time, we're told by RIM, is a switch at one of its control centers in England failed. A back-up system failed. And that shut down service for a large swath of the world. Now, in an attempt to fix that, the company throttled back service in the rest of the world. And the delays that stacked up in sending data out brought down service across the world.

RAZ: Let me ask you about the devices, because Blackberry's market share has been tanking for the past three years. From something like half of all mobile devices around the world just three years ago, now to I understand about 12 percent.

CUMMINS: That's right.

RAZ: Is the problem the devices? That they simply can't offer what Androids or iPhones can offer?

CUMMINS: Blackberry had a - RIM had a very difficult time realizing that there was a major shift in the market away from the corporate customer and towards the consumer market. Now, a lot of people worry that they are too far behind to catch up. They've promised a number of new products. They've launched a number of new Blackberry phones, which we understand are selling pretty well. Increasingly, however, people wonder whether that's enough.

RAZ: Chip, what do you think it will take for Research in Motion to fully recover from this?

CUMMINS: Well, I think a lot is riding on their new phones due out next year. If those phones have a significant wow factor, if they work and work well, then I can see RIM clawing back some of its market share. The big risk of course is that they don't do that and they become a niche player.

RAZ: Chip Cummins, thanks.

CUMMINS: Thank you.

RAZ: That's Chip Cummins. He covers Canada for the Wall Street Journal. He was speaking about the future of Research in Motion, that's the Canadian company that makes Blackberrys.

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