RIM Falls to 17-Month Low as India BlackBerry Service Ban Looms

Research In Motion Ltd., maker of the BlackBerry smartphone, fell to its lowest level in nearly 17 months as it seeks to avoid a possible ban on its messaging services in India.

RIM offered to lead an industry forum in developing standard practices for balancing the Indian government’s security needs with customers’ privacy requirements, according to a statement today. India has said it will ban some BlackBerry services Aug. 31 unless RIM resolves concerns the smartphones may be used for terrorist attacks or other illegal activities.

RIM said today it wants to find ways to address the government’s requests, while making sure its customers’ communications are secure. Its stock fell 90 cents, or 1.9 percent, to $46.84 at 4 p.m. New York time on the Nasdaq Stock Market, its lowest closing price since April 1, 2009.

“This whole security issue was definitely unexpected,” said Steven Li, an analyst with Raymond James Ltd. in Toronto. “This is something of a perfect storm.”

RIM, based in Waterloo, Ontario, is seeking growth in emerging markets as it faces increasing competition in North America from Apple Inc. and Google Inc. At the same time, countries from India to Saudi Arabia and the United Arab Emirates have threatened to curtail BlackBerry messaging services over concerns they could threaten national security and local mores.

Analysts, including Ehud Gelblum of Morgan Stanley, have cited conflicts with foreign governments as a potential problem for RIM’s prospects. Gelblum downgraded the stock on Aug. 20 to “underweight” citing, the “ongoing chorus of international services threatening to shut down BlackBerry service.”

India Proposal

RIM shares have dropped 18 percent since authorities in the U.A.E first announced a planned BlackBerry ban on August 1. They have declined 31 percent this year.

In its proposal for India, RIM didn’t identify other technology or communications companies that could participate in the forum. It said secure wireless communications are important for economic development in countries such as India.

“The use of strong encryption in wireless technology is not unique to the BlackBerry platform. It is unquestionably an industry wide matter,” the company said in its statement. “Banning such strong encryption-based information and communications services would severely limit the effectiveness and productivity of India’s corporations.”

Growing Scrutiny

The Canadian company will give India access to BlackBerry messaging beginning Sept. 1 to address its concerns, two government officials said on Aug. 16. RIM will first give Indian security agencies access on a manual basis, with information provided for individual phone numbers after government requests, said the officials who declined to be named because the discussions are private.

RIM will provide a more automated solution to tracking BlackBerry smartphone messages by November and company is also working on a solution to allow access to corporate e-mails, they said.

RIM reiterated in the statement today that the company maintains a “consistent global standard” for lawful access to its messaging system which “does not include special deals for specific countries.” The company also reaffirmed it can’t meet requests from governments for codes to users’ data because the BlackBerry corporate service was designed to prevent RIM, or anyone else, from being able to read encrypted information.

The BlackBerry infrastructure was designed to be a global system that works “independent of geography” and it’s a misperception that locating a network in India would help the government gain access to encrypted information, RIM said today.

The BlackBerry smartphone maker has about 1.1 million users in India out of a total subscription base of 46 million worldwide, said Mike Abramsky, an analyst at RBC Capital Markets in Toronto.

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

Enlarge image

RIM Falls as India BlackBerry Service Ban Looms

Andrew Harrer/Bloomberg

RIM offered to lead an industry forum in developing standard practices for balancing the Indian government’s security needs with customers’ privacy requirements, according to a statement today.

RIM offered to lead an industry forum in developing standard practices for balancing the Indian government’s security needs with customers’ privacy requirements, according to a statement today. Photographer: Andrew Harrer/Bloomberg

Aug. 10 (Bloomberg) – Richard Falkenrath of the Chertoff Group, a Bloomberg Television contributing editor, discusses the dispute between Research in Motion Ltd. and Saudi Arabia over the use of the company’s BlackBerry messaging services. Saudi Arabia allowed RIM to continue BlackBerry services while asking the Canadian company to put in place a system that will let the kingdom monitor user data. Falkenrath talks with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)