BlackBerry’s Fall From Executive Suite to London Looters May Bruise Brand

Research In Motion Ltd. (RIM)’s BlackBerry has become indispensable among executives for its easy-to-use messaging service. That same feature is attracting looters in Britain’s worst rioting since the 1980s.

In London, 16,000 officers on duty prevented a fourth night of unrest even as disturbances spread to Manchester in the north of the U.K. At least 770 people have been arrested in the capital since Aug. 6, when the violence began after a local black man, Mark Duggan, was shot and killed by police. Insurers face a bill of more than 100 million pounds ($163 million), the Association of British Insurers said yesterday.

Some rioters have used the free BlackBerry Messenger to organize, police said, leading for calls for the service to be suspended. The link between the unrest and the device may hurt the BlackBerry brand, said Jonathan Akwue, a director at the social media unit of London-based Engine Group, a marketing firm whose clients include Coca-Cola Co. (KO) and Sony Corp.

“The association is negative, and they’ve been blamed for it,” Akwue said in a phone interview. “It is, though, illogical to blame them. They didn’t cause the riots.”

RIM has been pushing demand from younger consumers to stave off market share advances from newer devices such as Apple Inc. (AAPL)’s iPhone and handsets based on Google Inc. (GOOG)’s Android operating system. More than a decade after its introduction, Waterloo, Ontario-based RIM’s BlackBerry is now the most popular phone for young adults and teens in the U.K., driven by the messenger service, which offers a free alternative to texting, telecommunications regulator Ofcom said this year.

Calls for Suspension

David Lammy, a member of the U.K. Parliament, yesterday called for the suspension of BlackBerry service to prevent its use among rioters. RIM said it is assisting London police, who are investigating the use of the messaging service in organizing riots. RIM representatives in Canada and the U.K. declined to comment beyond that when contacted yesterday and didn’t respond immediately when contacted by telephone in London today.

The prevalence of the devices among looters has led to a more than 300-fold increase in online mentions of the messenger service in relation to riots, with a third of those classified as negative and 3 percent as positive, according to researcher Brandwatch, which also monitors Twitter Inc. and Facebook Inc.

BBM was cited 27,000 times on Aug. 6 in online references, rising to 31,000 on Aug. 8, according to Brandwatch.

Police in Folkestone, England, arrested yesterday a man and a woman, both 18, for allegedly posting messages on Facebook encouraging others to join the riots. Police in Kent, where the city is located, asked residents to contact authorities if they see similar messages posted on Twitter or BlackBerry Messenger.

Cheaper Prices

BlackBerry’s popularity among young consumers has been helped by cheaper prices for more basic models, such as the Curve, and availability on pay-as-you-go service providers including Vodafone Group Plc. (VOD)

“They’ve got a reputational challenge to manage, which is within their own existing user base,” London-based Akwue said. “How do they manage that story as well as the association to the riot which has come about because young people have chosen the device?”

BlackBerry has fallen to the 25th most valuable global brand from 14th last year, according to Millward Brown Optimor’s 2011 BrandZ study.

Clean-Up Aid

The brand has also been used positively with communities using the tool to organize to clean up smashed properties, said Peter Walshe, senior director at Millward Brown.

RIM said on its U.K. Twitter account on Aug. 8 that it had engaged with authorities to “assist in any way we can.”

“It shows RIM is a good corporate citizen, helping the mobile operators live up to their lawful intercept obligations in the U.K.,” said Leif-Olof Wallin, an analyst at Gartner Inc. “It would be very detrimental to their brand to say that we’re in the business of helping hooligans to do mischief. That’s not what they want to be associated with.”

BlackBerrys and social-media websites also played a crucial part in communications between protesters during the “Arab Spring” in the Middle East, which toppled the leadership in Egypt and Tunisia and threatened the regime in Libya.

“Everyone from all sides of London meet up at the heart of London (central) OXFORD CIRCUS!! Bare SHOPS are gonna get smashed up some come get some (free stuff!!!),” read one of the BlackBerry messages provided to the Guardian newspaper.

Specific Targeting

“It seems that there was specific targeting of certain stores,” Chuka Umunna, opposition business minister for the Labour Party, said today in an interview with Maryam Nemazee on Bloomberg Television’s The Pulse. “Places that sell sportswear, like JD Sports, have been affected but also those that sell electrical goods.”

RIM fell $1.02, or 4.4 percent, to $22.10 at 4 p.m. in Nasdaq Stock Market trading. The stock has dropped 62 percent this year as newer phones such as the iPhone and devices based on Android grab market share.

The company said in June that sales will drop this quarter for the first time in nine years.

RIM is targeting less developed markets with lower-cost phones and BlackBerry Messenger, a tactic that helped it become the top smartphone brand in Latin America last year, according to researcher IDC.

The company ran international advertising campaigns last year with tag lines such as “Conversations come naturally on BBM,” touting the service as a way to stay in touch more cheaply than calling.

“Now you see the BlackBerry used for purposes that were perhaps not intended by the designer,” said Patrik Karrberg, a researcher at the London School of Economics’ Information Systems Innovation Group. “Young people understand it’s a general purpose technology. It’s in the hands of the users, and you can use it for good or for evil.”

To contact the reporters on this story: Jonathan Browning in London at jbrowning9@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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