The BlackBerry Blackout: Research In Commotion

Research In Motion's great big BlackBerry blackout seems to have subsided, but it couldn't have come at a worse time for the company. Several quarters of lackluster performance have already made investors restless; now many enterprise customers are likely displeased with RIM as well. Meanwhile, HP swerves, Sprint tries a tricky maneuver, and Netflix pulls a Qwik u-turn.

The Great BlackBerry Blackout of '11 is clearing up, and not a moment too soon for users who rely on Research In Motion's (Nasdaq: RIMM) technologies for critical business communications. The problems started early in the week for customers in Europe, the Middle East and Africa, then spread to India and South America before making its way into North America, including RIM's home turf in Canada.

The official cause of the conniption was the failure of a dual-redundant high-capacity core switch, according to RIM. So it sounds like something deep in the bowels of the company failed, the backup behind that failed, and problems just mushroomed from there. Service was slow, messages were delivered hours late, and communications broke down at probably thousands of companies and organizations.
RIM acknowledged there was a problem relatively early on, but there was much confusion about which services weren't working and which were. Some users claimed to have no problems whatsoever, while others in the same region said their phones were practically unusable. RIM's still trying to discern the root cause, but it has apologized quite frequently over the past few days, and at the time I'm saying this things seem to be getting back to normal.
There's never a good time for a service outage like this, but it's an especially bad moment for RIM to fall on its face. The company's endured quarter after quarter of disappointing business, its phones struggle to compare with top-shelf Androids and iPhones, investors are growing restless, and its two CEOs are under growing pressure to justify their own existence.
Meanwhile, Apple's (Nasdaq: AAPL) bragging about selling 1 million iPhone 4Ss on pre-order alone, despite the fact that the phone got kind of a ho-hum reception, by Apple's standards. Android phones have been getting plenty of good attention at the CTIA confab this week, and even though Google (Nasdaq: GOOG) delayed the debut of Ice Cream Sandwich, it's still going to happen soon. And Microsoft's (Nasdaq: MSFT) just about ready to jump in with its Nokia (NYSE: NOK) phones. All these are growing into bigger threats to the enterprise business that RIM has relied on for years.
Then a massive outage comes along and irritates people who use their BlackBerries the most -- the core customers RIM can least afford to lose.

Listen to the podcast (12:37 minutes). 

Tight Squeeze

As the newest U.S. member of team iPhone, Sprint (NYSE: S) is in a very precarious position. It's in a spot that could mean disaster or a huge payoff, depending on how it plays.
At the moment, Verizon is the biggest carrier in the U.S., but that could change if AT&T (NYSE: T) gets its way and swallows T-Mobile. Ether way, though, they're both way ahead of Sprint in terms of subscriber numbers, which may be the reason it's taken four and a half years for it to convince Apple to let it carry iPhones.
Getting the iPhone meant a huge commitment for Sprint. It's reportedly gone in for an agreement that locks it into buying 30 million iPhones over the next several years. And those nice, new smartphones definitely do not cost a mere $200 when carriers buy them from the manufacturers. So Sprint just signed a very long, very high-rent lease, and it's going to have to sell like mad in order to live in iPhone's building.
To make sure that happens, Sprint is offering something the other two U.S. iPhone carriers do not: unlimited data for new sign-ups. New customers at Verizon and AT&T have to choose a limited plan that penalizes users for going over the monthly allotment. Sprint says its customers will be held to no such limitations.
And that could be a serious draw for some users. Even though the wireless companies that impose limits say overages are relatively rare, the fact that you're living under a limit can put you in kind of a penny-pinching mentality when it comes to wireless data. You feel like checking your usage all the time, you avoid big downloads because you just never know, so on. So Sprint might have a real winner.
But it's going to be a tricky balancing act to pull off. Yeah, Sprint wants to reel in new customers, but we've already seen what a very popular, data-hungry phone like the iPhone can do to a carrier's network. AT&T learned a hard lesson in the way its service degraded in some places when it was the one and only iPhone carrier in the U.S. There was just too much traffic. Its problems have subsided to some degree now that others have the iPhone too, and after it spent a lot of that iPhone revenue to improve its network.
New customers will mean more revenue for Sprint as well, but it's still tied to its deal to buy all those iPhones from Apple, and if too many people flock to Sprint's unlimited offer and pile onto its network, it may have to live through AT&T's nightmare.

Wolf in Red Clothing

The Android mobile OS has been known for being the target of a few malicious applications in the past. Google usually takes that kind of software off its shelves if it's found in the Android Market, or sometimes even pulls a remote kill operation. One thing many of these malicious apps have in common is that they're very often tacky, crude and dumb. They're apps for stuff like photos of women in bikinis, or just generally very shady-looking apps that anyone with a bit of online street smarts should immediately know to avoid.
But one malicious Android app that caught the attention of Symantec (Nasdaq: SYMC) recently apparently dresses itself up in a trusted brand name: Netflix (Nasdaq: NFLX). The online movie provider -- the legit Netflix, I mean -- recently came out with an official Android app, and now it seems some malware maker tried to take advantage of its popularity by pushing out a Netflix app of its own.
However, the dirty Netflix app, which Symantec has dubbed "Android.Fakeneflic" after it was found in a user forum, is built only to steal users' Netflix log-in credentials -- usually an email address and a password. Users download it and plunk in their info, but then are told, oops, the app isn't compatible with their phone. Sorry!
Meanwhile, their credentials are sent off to a remote server. And that means some criminal somewhere could log into other peoples' accounts and totally screw around with their DVD queues. Shocking! Really, though, it could be a little more serious than that. Some people use the same logon info with Netflix as they do with their email accounts, or their banking sites.
Also, some odd circumstances suggest maybe there's a little more to this malware. That server that's supposed to receive all the stolen data is currently offline. So maybe the crooks suspected that the gig was up and pulled the plug, or maybe this was a test running up to a much more harmful mobile app -- like one that pretends to be the official app of a bank or credit-card operator.
Google's taken hell from critics in the past who think the company needs to take a step back from its philosophy of openness and do more to make sure harmful goods aren't getting into Android users' hands. There's a certain amount of common sense anyone needs to use before deciding to download apps from strangers, but apps that present themselves as trusted brands can potentially fool a lot more people.

Cold Feet?

Newly installed HP (NYSE: HPQ) CEO Meg Whitman started her job last month on what may have sounded like kind of a strange note. Even though her predecessor, Leo Apotheker, had been so unpopular that he didn't even last a year as the head of the company, Whitman said she was going to follow through with the great big tire-screeching left turn Apotheker had announced a few weeks before he was fired.
Under Apotheker's direction, HP was going to spin off or sell its personal computer division, which happens to be the biggest PC-making operation on the planet. It also immediately axed webOS devices like the TouchPad and its Pre smartphones. In short, the plan had HP turning its back on consumers and embracing enterprise services.
The fact that Apotheker would take HP in that direction shouldn't have been a big shocker -- he's a former SAP (NYSE: SAP) boss, after all. But the news still sent HP's stock into decline, and a month later Apotheker was sent packing. Draw your own conclusions.
Oddly enough, when Whitman took his place, she said she was all for going along with the plans of the guy who just got fired for doing something investors thought was crazy.
Or not. A recent report in The Wall Street Journal states that HP is seriously reconsidering the idea of spinning off the PC business now that analysts think it may actually be more costly to get rid of it than to keep it.
There's also a report out that HP executives met recently to determine the fate of webOS and whether its Palm division should stay or go.
So there's some heavy mulling going on in HP. Very serious mulling. And rumination.
If the spin-off idea really is abandoned, it might be an honest change of mind on the part of Whitman and the board. Depending on who has and has not been interested in taking these divisions off HP's hands, perhaps a month was all it took for it to become clear the transition would be too expensive.
Or maybe Whitman never really intended to go Apotheker's way at all. The CEO change-up came about so abruptly that perhaps she thought that immediately announcing another 180-degree turn would just be too much for everyone to digest.

On Second Thought ...

Maybe Netflix CEO Reed Hastings had the beginnings of a great idea when he thought about eventually splitting Netflix's DVD-by-mail service from its over-the-wire Instant business. The two branches focus on different needs, the accounting is probably nowhere near the same, and one addresses the medium of the future while the other clings to little plastic platters.
So yeah, sounds like he has a vision for where his company's going. The problem, though, is that Netflix got impatient on its way getting there, and the changes it foisted on customers happened too fast. For example, the price reshuffle: It split Netflix billing between DVDs and instant, and the new price of each plan, taken individually, is actually pretty reasonable, if you compare it to a bunch of rentals on iTunes or going to a BlockBuster store, if you can find one.
But for some users, the changes resulted in an overnight 60 percent price hike.
And just as Hastings was apologizing for that unexpected move, he made yet another: He announced plans just a few weeks ago to shove off the Netflix DVD-by-mail service as a completely separate brand. And the split would run deep -- the new website wouldn't share info like recommendations and title availability with the streaming-only Netflix.com. It was put at a further disadvantage by being saddled with the name "Qwikster."
But it's OK now -- you can stop trying to remember how to spell Qwikster. Just forget the word ever existed. Netflix has backed down. It's keeping its businesses tied together after reactions from both customers and investors.
Even though the change to Qwikster didn't mean any additional costs to customers, it was almost as unpopular as the price reshuffle. Demanding more money for the same stuff might make users angry, but money is at least a motivation that people can understand. With Qwikster, it felt like Netflix was making itself more difficult to use just for the sake of screwing with everyone. It may have fit into someone's grand vision for the future of the company, but from a user's perspective, what was once a simple and inexpensive service was about to get more costly and more complicated. Money's one thing -- nothing stays the same price forever. But why make things more difficult to use?
Although Netflix retreated from this gambit, the last six months have taken their toll. The price hike, the DVD spinoff, and the canning of the DVD spinoff have added up to a shrunken and semi-inflamed user base that's getting kind of tired of these late-night emails explaining what the plan is over and over. And of course, Netflix could still go ahead and schlep off the DVD business sometime in the future, but hopefully it'll wait until the Instant library gets stronger.
Don't count on ever hearing that Qwikster name again, though, except maybe in some version of Trivial Pursuit.