System Failure Affects BlackBerry Service in Western Hemisphere

TORONTO – Research In Motion Ltd. (RIMM) said Wednesday that BlackBerry service had been restored to most users of the popular wireless e-mail device after an overnight service interruption hit customers across North America.

The company said in a statement that it's reviewing the root cause of the disruption, which began Tuesday night, and is "closely monitoring systems to maintain normal service levels". It gave no details on what caused the outage.

Although BlackBerry e-mail service was "delayed or intermittent," RIM said the phone service wasn't affected.

RIM has about 8 million subscribers who use various models of its ubiquitous BlackBerry. The device has become a staple with lawyers, business people and other professionals, but has yet to reach similar consumer-market popularity.

RIM's often-volatile shares, which can regularly lose or gain between 1 and 3 percent in a session, were up 78 cents at $132.05 on Nasdaq, recovering from a drop that came shortly after the market opened. On the Toronto Stock Exchange, they rose 22 Canadian cents to C$149.04.

Nick Agostino, an analyst at Research Capital in Toronto, said RIM has a strong track record of maintaining stable service, and said those who would call the disruption a black eye for the company are "just overblowing the whole situation."

He noted European service wasn't affected, and said service outages have been very rare for RIM in the past.

"This sort of stuff is expected," Agostino said. "Obviously you don't want it to be frequent."

Carmi Levy, senior research analyst with Info-Tech Research Group, said that although the outage will have no long-term impact at all as far as investors are concerned.

"I think it does illustrate a technical issue that the company does need to deal with," he said.

"They need to look at their architecture long-term and they need to ask some very hard questions about whether their current network is strong enough and big enough to support the kind of subscriber growth that they're seeking."

RIM added 1.02 million BlackBerry subscribers in the fourth quarter alone, and the torrid pace of growth isn't expected to slow any time soon. For the first quarter ending June 2, the company has forecast it will add another 1.125 million to 1.15 million customer accounts.

While RIM has remained a stock-market darling because of its growth prospects and the rave reviews it has received for its device lineup, the service outage is the latest in a string of recent stumbles for the Waterloo, Ontario-based company.

Earlier this month, it revealed it is now facing a formal investigation by the U.S. Securities and Exchange Commission over historical stock-option grants. The SEC earlier had been conducting an informal inquiry.

As well, investors dumped its shares in wake of its fourth-quarter results which met, but didn't exceed, expectations.

It is still working to get its financial filings up to date following a $250 million earnings restatement it announced last month related to mistakes in how it granted stock options in the past. Jim Balsillie, the company's co-CEO, gave up his dual role as the company's chairman when the restatement was disclosed.

Most analysts have noted the SEC investigation but have not cited it as a top concern.