BlackBerry's business problem

November 10, 2011: 5:00 AM ET

Slow browsing, few apps, and an embarrassing service outage. Can BlackBerry recover from its biggest crisis yet?

FORTUNE -- Addictions are tough to break, yet Research in Motion seems to be doing whatever it can to help users cast aside their CrackBerrys once and for all. Consider just a few of the reasons the Canadian maker of the BlackBerry smartphone is ailing: an international outage in mid-October; the Playbook tablet, a weak answer to the iPad; and phones with web browsing that is both laughably low-quality and slow as molasses.

All of these woes mean that RIM (RIMM) faces its greatest existential crisis yet. At a time when its product lineup and network service have never been weaker, Apple (AAPL) and Android users are fiercely attacking BlackBerry's greatest strength -- the business market. Sure, BlackBerry had its moment of hipness, when advertising built around the likes of U2's Bono helped convince kids its smartphones were cool. But "the enterprise" was always RIM's sweet spot. Selling functional e-mail devices with a proprietary -- and secure -- network is where BlackBerry has excelled. That's why its three-day service outage was such a black eye.

For a while now BlackBerry has lagged in the kind of applications that make iPhones and Android devices so popular. And recently Apple has been highlighting business applications like Dropbox and Cisco's (CSCO) WebEx in its iPhone advertising. Though Apple focuses on consumers, it frequently notes that 93% of the Fortune 500 is testing or has already deployed the iPhone -- a terrifying statistic for RIM.

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At the same time Motorola (MMI), which Google (GOOG) is buying, suggests its new Droid RAZR will sell well to chief information officer buyers, who value its inexpensive but high-quality "cloud" capabilities. The cloud lets users access content on networks businesses don't have to maintain themselves. "CIOs today understand there is a shift in IT to cloud and mobilization, whether they like it or not," says Motorola Mobility CEO Sanjay Jha.

RIM still has plenty going for it. Peter Walker, the company's senior director for enterprise product management, trumpets the "BlackBerry Balance" technology, for example, which lets business customers control employees' devices while enabling the use of personal apps. It is also beefing up its offerings from independent app developers. A bevy of new phones and tablets built around a redesigned operating system is expected next year.

Most important, the company still has 70 million worldwide subscribers, and shipped some 10.6 million smartphones last quarter. "A whole lot of businesses remain BlackBerry loyalists," says Kevin Restivo, a Toronto-based analyst with market tracker IDC. He says RIM is still strong for businesses where compliance matters, like law firms. Still, he notes, "enterprise is not the exclusive domain of RIM anymore." The problem with this narcotic, it seems, is that there are many suitable replacements.

--Reporter associate Richard Nieva

This article is from the November 21, 2011 issue of Fortune.

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Adam Lashinsky
Adam Lashinsky
Senior Editor at Large, Fortune

Adam Lashinsky is a San Francisco-based editor-at-large for FORTUNE, covering Wall Street and Silicon Valley. Lashinsky joined FORTUNE in 2001, after two years as a contributing columnist. Prior to joining FORTUNE, Lashinsky covered Silicon Valley for TheStreet.com and The San Jose Mercury News. A Chicago native, Lashinsky holds a B.A. in history and political science from the University of Illinois at Urbana-Champaign.

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