updated 04:55 pm EDT, Fri October 14, 2011
Estimate shows steep cost to RIM for failure
RIM's four-day BlackBerry outage might have cost it $100 million, JPMorgan Chase analyst Rod Hall estimated on Friday. Although he couldn't verify exact pricing because of RIM's confidentiality, he based the estimate on the calculation that RIM would collect $1 billion as part of its usual revenue sharing with carriers. Hall cautioned that there could be a significant margin of error, but he added that RIM would have to likely have to pay at least some of it back.
The RIM conference call apologizing for and providing more details on the outage alluded to compensation, at least for carriers and corporate customers, through agreements. Under its service terms, RIM is contractually obligated to keep its servers up for a typically high ratio of time, with just a fraction of a percent of downtime. Nearly four full days without service will have easily broken the pacts and could incur extra punitive fees.
RIM hasn't confirmed what it might owe.
If in the vicinity of RIM's actual costs, it could jeopardize RIM's ability to turn a profit for its fall quarter ending in November. Net profit dropped by more than half to $329 million and would come significantly closer to the break-even point even if it didn't see any more income declines. RIM estimates its phone shipments bouncing back up and may not be as concerned, although the outage may have shaken the trust of BlackBerry users themselves.
The outage was just resolved but may not have come in time to stop some BlackBerry owners making the switch. [via Financial Post]