Case
Supplementary Resources
Abstract
In 2010, Research in Motion's BlackBerry offered its corporate clients the ultimate in smartphone security. All messages were encrypted before leaving the device and then were routed through a series of Network Operating Centers located in Canada. This made it difficult for government officials or private parties to eavesdrop on BlackBerry calls, texts, or e-mails.
Sound security was one of the strategic advantages of the BlackBerry over other wireless devices. Customers were confident that their sensitive communications could be kept private anywhere in the world. As a result, the BlackBerry was the device of choice for military and other government, medical, and corporate clients.
However, some governments were concerned about BlackBerry's security features, claiming that they made it difficult for them to protect their citizens from criminals and terrorists, particularly after the Al Qaeda attacks in the United States on September 11, 2001, and the terrorist attacks in Mumbai, India, in 2008. In the past, law enforcement and intelligence agencies that wanted to monitor the communications of suspected criminals could perform a wiretap on a landline phone, or they could intercept the mail.
The BlackBerry was the most visible symbol of the decreased power of governments to track the communications of their citizens and foreigners. Indeed, the 2008 Mumbai attacks had been orchestrated using BlackBerrys. At the same time, the dramatic expansion of BlackBerry adoptions, particularly by government and institutional users, was undoubtedly fueled by the stability and security of the service in comparison with other communication providers in the wake of the 9/11 attacks.
In early August 2010, this tension between privacy and national security came to the fore after regulators in the United Arab Emirates threatened RIM: either provide a way for the UAE government to monitor the communications of BlackBerry smartphone users, or the UAE would cut off all BlackBerry service beginning October 11. The stated rationale for the request was to intercept terrorists and other criminals, but there was reason to believe that the UAE also wanted the capability to crack down on political dissidents.
RIM initially refused the UAE's demand, responding that it would be impossible to circumvent its security system; even RIM was not able to access its customers' data. Analysts wondered whether the UAE government's desire to transform the UAE into a global business hub would prevent it from following through on its threat. RIM customers worried that either the security of their data would be compromised, or they would lose some of their BlackBerry functionality. On October 9, 2010, two days before its deadline, the UAE dropped its threatened ban. It was not revealed what agreement was reached between the United Arab Emirates and Research in Motion and what role, if any, the Canadian government played in resolving the dispute.
As disputes with other countries continued, it became evident that RIM had made concessions. For example, on January 11, 2011, RIM agreed to implement internet filtering in Indonesia to block pornography, the first time it did this in any country. Then, on January 14, 2011, RIM reported that it had given the Indian government tools to monitor instant messages and public e-mail services, but not corporate e-mail. Yet the Indian government had subsequently indicated that this was not enough: they wanted access to corporate data as well and imposed a March 31, 2011 deadline.
RIM had some tough choices to make as it tried to decide how to respond to the increasingly strident government demands, especially from countries that did not necessarily possess the same respect for human rights as Canada. What would be the cost of tailoring its service country by country? Could RIM afford to lose its business in developing markets, such as UAE and India? How would RIM's customers throughout the world react if RIM compromised the security they had come to expect? The Apple iPhone and Google Android were in hot pursuit of BlackBerry customers, and RIM could not afford a misstep.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: Worldwide Smartphone Sales to End Users by Operating System, 2008
(Thousands of Units) | |||||
---|---|---|---|---|---|
Company | 2008 Sales | 2008 Share | 2007 Sales | 2007 Share | Growth 2007-2008 |
Symbian | 72,933.5 | 52.4 | 77,684.0 | 63.5 | -6.1 |
Research in Motion | 23,149.0 | 16.6 | 11,767.7 | 9.6 | 96.7 |
MS Windows Mobile | 16,498.1 | 11.8 | 14,698.0 | 12.0 | 12.2 |
Mac OS X | 11,417.5 | 8.2 | 3,302.6 | 2.7 | 245.7 |
Linux | 11,262.9 | 8.1 | 11,756.7 | 9.6 | -4.2 |
Palm OS | 2,507.2 | 1.8 | 1,762.7 | 1.4 | 42.2 |
Other OSs | 1,519.7 | 1.1 | 1,344.0 | 1.1 | 13.1 |
Total | 139,287.9 | 100.0 | 122,315.6 | 100.0 | 13.9 |
Note: The “Other OSs” category includes sales of Sharp Sidekick devices based on the Danger platform.
Source: Gartner (March 2009)
Exhibit 2: Worldwide Smartphone Sales to End Users by Operating System, 2009
(Thousands of Units) | ||||
---|---|---|---|---|
Company | 2009 Units | 2009 Share | 2008 Units | 2008 Share |
Symbian | 80,878.6 | 46.9 | 72,933.5 | 52.4 |
Research in Motion | 34,346.6 | 19.9 | 23,149.0 | 16.6 |
iPhone OS | 24,889.8 | 14.4 | 11,417.5 | 8.2 |
MS Windows Mobile | 15,027.6 | 8.7 | 16,498.1 | 11.8 |
Linux | 8,126.5 | 4.7 | 10,622.4 | 7.6 |
Android | 6,798.4 | 3.9 | 640.5 | 0.5 |
Web OS | 1,193.2 | 0.7 | NA | NA |
Other OSs | 1,112.4 | 0.6 | 4,026.9 | 2.9 |
Total | 172,373.1 | 100.0 | 139,287.9 | 100.0 |
Exhibit 3: Worldwide Smartphone Sales to End Users by Operating System, 2010
(Thousands of Units) | ||||
---|---|---|---|---|
Company | 2010 Units | 2010 Share | 2009 Units | 2009 Share |
Symbian | 111,576.7 | 37.6 | 80,878.3 | 46.9 |
Android | 67,224.5 | 22.7 | 6,798.4 | 3.9 |
Research in Motion | 47,451.6 | 16.0 | 34,346.6 | 19.9 |
iOS | 46,598.3 | 15.7 | 24,889.7 | 14.4 |
Microsoft | 12,378.2 | 4.2 | 15,031.0 | 8.7 |
Other OSs | 11417.4 | 3.8 | 10432.1 | 6.1 |
Total | 296,646.6 | 100.0 | 172,376.1 | 100.0 |
Source: Gartner (February 2011)
Exhibit 4: Research in Motion Financial Highlights, 2009
(in thousands of U.S. dollars, except per share amounts) | |||
---|---|---|---|
U.S. GAAP | February 28, 2009 | March 1, 2008 | March 3, 2007 |
Statement of Operations data | |||
Revenue…………………………………………… | $11,065,186 | $6,009,395 | $3,037,103 |
Gross margin……………………………………… | $5,097,298 | $3,080,581 | $1,657,802 |
Research & development and selling, general and administration……………………………………… | 2,180,399 | 1,241,310 | 774,095 |
Amortization………………………………………. | 194,803 | 108,112 | 76,879 |
Investment income…………………………………. | 78,267 | 79,361 | 52,117 |
Income before taxes……………………………….. | 2,800,363 | 1,810,520 | 858,945 |
Provision for income taxes…………………………. | 907,747 | 516,653 | 227,373 |
Net income…………………………………………. | $1,892,616 | $1,293,867 | $31,572 |
Earnings per share…………………………………. | |||
Basic……………………………………….. | $3.35 | $2.31 | $1.14 |
Diluted……………………………………… | $3.30 | $2.26 | $1.10 |
Operational data (percentage of revenue) | |||
Gross margin………………………………………. | 46.1% | 51.3% | 54.6% |
Research and development…………………………. | 6.2% | 6.0% | 7.8% |
Selling, marketing and administration…………….. | 13.5% | 14.7% | 17.7% |
Balance Sheet data | |||
Cash, cash equivalents, short-term investments and investments………………………………………… | $2,238,847 | $2,343,996 | $1,412,878 |
Total assets…………………………………………. | $8,101,372 | $5,511,187 | $3,088,949 |
Shareholders' equity………………………………. | $5,874,128 | $3,933,566 | $2,483,500 |
Exhibit 5: Research in Motion Balance Sheet, 2009
(United States dollars, in thousands) | ||
---|---|---|
As at | ||
February 28, 2009 | March 1, 2008 | |
Assets | ||
Current | ||
Cash and cash equivalents | $835,546 | $1,184,398 |
Short-term investments | 682,666 | 420,709 |
Trade receivables | 2,112,117 | 1,174,692 |
Other receivables | 157,728 | 74,689 |
Inventory | 682,400 | 396,267 |
Other current assets | 187,257 | 135,849 |
Deferred income tax asset | 183,872 | 90,750 |
4,841,586 | 3,477,354 | |
Long-term investments | 720,635 | 738,889 |
Capital assets | 1,334,648 | 705,955 |
Intangible assets | 1,066,527 | 469,988 |
Goodwill | 137,572 | 114,455 |
Deferred income tax asset | 404 | 4,546 |
$8,101,372 | $5,511,187 | |
Liabilities | ||
Current | ||
Accounts payable | $448,339 | $271,076 |
Accrued liabilities | 1,238,602 | 690,442 |
Income taxes payable | 361,460 | 476,328 |
Deferred revenue | 53,834 | 37,236 |
Deferred income tax liability | 13,116 | - |
Current portion of long-term debt | - | 349 |
2,115,351 | 1,474,431 | |
Deferred income tax liability | 87,917 | 65,058 |
Income taxes payable | 23,976 | 30,873 |
Long-term debt | - | 7,259 |
2,227,244 | 1,577,621 | |
Shareholders' Equity | ||
Capital stock Authorized – unlimited number of non-voting, cumulative, redeemable, retractable preferred shares; unlimited number of non-voting, redeemable, retractable Class A common shares and an unlimited number of voting common shares Issued – 566,218,819 voting common shares (March 1, 2008 – 562,652,461) | 2,208,235 | 2,169,856 |
Retained earnings | 3,545,710 | 1,653,094 |
Additional paid-in capital | 119,726 | 80,333 |
Accumulated other comprehensive income | 457 | 30,283 |
5,874,128 | 3,933,566 | |
$8,101,372 | $5,511,187 |
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved