Blackout For BlackBerry? UAE Threat Sends RIM Shares Tumbling


Shares of Research In Motion took a tumble in U.S. trading Monday following word that the United Arab Emirates (UAE) and possibly other Middle Eastern countries would suspend services for BlackBerry users.

U.S. shares of RIM, which trade on the Nasdaq, were down by as much as 2.4 percent (or $1.40) to $56.12 Monday morning. RIM did not respond immediately to a request for comment by CRN and has not released a statement on the UAE matter.

The UAE government announced Sunday that it would ban BlackBerry e-mail, messaging and browsing services in the country starting Oct. 11 because those services "allow users to act without any legal accountability, causing judicial, social and national security concerns."

The problem, as UAE officials identified it, is that BlackBerry data moves through RIM servers around the world where the UAE can't gauge whether illegal activity is taking place. According to reports, Saudi Arabia is also expected to take similar steps against BlackBerry devices.

UAE regulators confirmed to the Associated Press on Monday that the ban, which is scheduled to take effect on Oct. 11, would extend to everyone using BlackBerry services in the UAE, including visitors roaming on foreign phones and data plans.

According to Matthew Robison, an analyst with Wunderlich Securities, the ball is in RIM's court with regard to negotiating with the countries. Robison noted a collective 1.2 million BlackBerry users in the UAE and Saudi Arabia.

"If Research In Motion decides not to engage in further Middle East negotiations, we would expect tough sequential comparisons for subscriber additions this quarter and next," wrote Robison in a research note Monday.

Strategy Analytics' Neil Mawston suggested that the explosion of mobile data traffic worldwide will mean more of these types of conflicts between smartphone makers and carriers and countries with strict data security policies.

"Countries that already have relatively tight PC Internet controls are likely to turn their focus increasingly to wireless data services as they become more popular," Mawston told Reuters in a Monday interview.