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Fri 13 Aug 2010 07:01 PM

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RIM reassures Wall Street clients over BlackBerry concerns

At least one corporate customer has told RIM it's not satisfied with its explanations.

RIM reassures Wall Street clients over BlackBerry concerns
SECURITY REASSURANCE: Research In Motion is seeking to reassure its Wall Street customers about the security of its BlackBerry email service. (Getty Images)

Research In Motion is seeking to reassure Wall Street customers about the security of its BlackBerry email service as countries including Saudi Arabia and India press for more access to its network, said two people familiar with the situation.

RIM has held at least one conference call in the past week with clients including Goldman Sachs Group and JPMorgan Chase to discuss BlackBerry operations, said the people who didn’t want to be named because the talks were private.

At least one corporate customer has told RIM it’s not satisfied with the explanations so far and is seeking an additional meeting, according to one person.

The company needs to persuade customers of the security of its messaging system, said Scott Sutherland, an analyst at Wedbush Securities in San Francisco, who recommends buying the stock.

The talks underscore the challenges for Waterloo, Ontario based RIM as it expands in emerging markets as growth in North America slows. Revenue from outside North America rose to 37 percent of RIM’s $15 billion in revenue in the last fiscal year, up from 23 percent in the fiscal year ended February, 2005.

Corporate customers such as Wall Street banks favor RIM’s BlackBerry because its encryption and other safeguards protect communications from prying eyes.

Saudi Arabia, the UAE and India have pushed for more access to BlackBerry services, out of concern the smartphone could be used to coordinate terrorist attacks or violate national mores.

Saudi authorities decided this week to allow the BlackBerry messaging service to continue in the country, after threatening a ban.

RIM and the kingdom’s wireless operators are making progress in implementing a system to allow monitoring of user data, the state owned Saudi Press Agency said, citing the country’s telecommunications regulator.

Such reports have prompted questions from corporate customers about whether RIM is making concessions on the security of its software, said one of the people familiar with the conference call.

Sutherland said: “This whole issue has come up very quickly. Trying to solve something this quickly obviously triggers concerns that there will be loopholes created in the system.”

RIM fell 65 cents, or 1.2 percent, to $53.52 at 9:45 am in Nasdaq Stock Market trading. Since the UAE said on Aug 1 that it plans to suspend BlackBerry service, shares had fallen 5.8 percent through yesterday.

RIM said on Aug 4 it cooperates with governments around the world on a consistent basis and any claims it’s providing special access to one government are inaccurate.

The company also said 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.

Governments have gone public with their demands. The UAE said on Aug 1 it would ban BlackBerry Messenger, email and Web browsing services because of security concerns beginning Oct 11.

The Indian government yesterday said RIM and wireless operators had to give regulators access to mobile communications by the end of the month.

Onkar Kedia, spokesman for the country's home ministry in New Delhi, said: “Our message to RIM and service providers is that if they don’t come up with a technical solution by Aug 31, then the home ministry will take a view and will shut down BlackBerry Messenger and business enterprises services."

RIM issued a statement yesterday to customers that it said was in response to government comments in India.

The statement said: “Although RIM cannot disclose confidential regulatory discussions that take place with any government, RIM assures its customers that it genuinely tries to be as cooperative as possible with governments in the spirit of supporting legal and national security requirements, while also preserving the lawful needs of citizens and corporations."

The company also said the “security architecture” of its corporate email system hasn’t been modified for any country.

Tenille Kennedy, a spokeswoman for RIM, declined to comment beyond the statement yesterday. Michael DuVally, a spokesman for Goldman Sachs, and Brian Marchiony, a spokesman for JPMorgan, also declined to comment.

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