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Just How Costly Was the Blackberry Outage?

by Brandon Russell | October 14, 2011October 14, 2011 6:15 pm PDT

Research in Motion

It’s been a rough year for Research in Motion (RIM). Their market share has steadily decreased throughout 2011 and, more worryingly, the company endured a much publicized outage this past week that left customers in the United States, Africa, Canada, Europe and the Middle East all without service for three days – the biggest outage in the company’s history.

According to a Friday report by Financial Post, the debacle could cost the Waterloo-based company more than $100 million in lost revenues. Rod Hall, an analyst for JPMorgan, stated that, while there may be a margin for error in his estimates, RIM will in all probability have to refund fees charged to wireless carriers for every BlackBerry user. However, discussions are yet to begin regarding carrier compensation.

This isn’t the first time RIM has had to compensate for network outages, said Scotia Capitol analysts Gus Papageorgiou, but it’s definitely the most substantial. In fact, Papageorgiou makes his own similar loss revenue estimation, saying that accounting for user fees, gross margins and corporate tax rates, RIM’s loss of service can hit $117.7 million.

We estimate the worst case scenario is that RIM refunds a month’s worth of BlackBerry fees to its carrier partners for half of its subscriber base, said Papageorgiou.

RIM’s global subscriber base is currently at 70 million. Papageorgiou goes on to say that, despite the outage, shareholders shouldn’t take any drastic actions as RIM gets the disaster under control throughout the weekend.

With faltering market share and less-than-stellar performance over the past few years, the recent outage could mean a tough future is ahead for RIM, especially with Android and iOS popularity rising through the roof. Was the apology from co-CEO Mike Lazaridis enough? Are you confident RIM can turn it around, or is it time for Blackberry customers to move on? Sound off in the comments.

[via Financial Post]

Brandon Russell

Brandon Russell enjoys writing about technology and entertainment. When he's not watching Back to the Future, you can find him on a hike or watching...