BlackBerry Failure Sparks Shareholder Revolt

RIM blames a core switch for a third day of BlackBerry outage, and shareholders demand a change

A leading investor in BlackBerry maker RIM has called for the company to sack its chief executives and put itself up for sale, as the firm struggled with service outages – which are now blamed on the failure of a core switch.

Jaguar Financial Corp began a campaign in September, to get co-CEOs Jim Balsillie and Mike Lazaridis removed from the company and to have the company sell itself in pieces. Meanwhile, the service problems, which started on Monday have entered their third day;  a statement from RIM has given some details of the cause, but user disatisfaction is growing.

Breaking up the party

“Everybody is in support of a sale of RIM or another value creative transaction,” Jaguar chief executive Vic Aboini told Reuters, adding that thecompany could be split into a network company, a device company and a patents company. Jaguar has been buying up RIM shares since the share price fell sharply early this year, and with backing from eight percent of RIM shareholders, Aboini hopes to force a shareholders’ meeting.

RIM shares had been at $70 in February but have sunk as low as $19.29 last week.The two CEOs, between them, own ten percent of RIM’s stock.

Meanwhile, RIM has issued a statement blaming the continued outages on a broken switch coupled with a failure of the failover, producing an overload.

“The messaging and browsing delays being experienced by BlackBerry users in Europe, the Middle East, Africa, India, Brazil, Chile and Argentina were caused by a core switch failure within RIM’s infrastructure,” said RIM at 10pm UK time on Tuesday. “Although the system is designed to failover to a back-up switch, the failover did not function as previously tested. As a result, a large backlog of data was generated and we are now working to clear that backlog and restore normal service as quickly as possible. We apologize for any inconvenience and we will continue to keep you informed.”

The effect on RIM’s users could be as severe as on the shareholders, accelerating the already steep decline in BlackBerry users. Even before the outage, analysts were predicting disaster for the company.

“With only about 16.5 million US users and an average loss of half a million users per month,” said analyst Horace Dediu of Asymco on friday, “unless something drastic happens, RIM could lose its entire US user base by the end of next year.”

RIM has failed to come up with a phone to match the success of Android and iPhone, and is currently planning future phones based on the QNX operating system used in its PlayBook tablet – but will not deliver these for some months.

In August it unveiled the newest version of its best-selling BlackBerry Curve smartphone, hot on the heels of the new Bold, Torch and Touch handsets.