bloodbath

Hiccups in BlackBerry Service Spread; Five Continents Affected

The service interruptions began on Monday and initially affected BlackBerry owners in Europe, Africa and the Middle East. By Tuesday, the problem migrated to Brazil, India, Chile and Argentina. On Wednesday, users in North America began complaining of the same disruptions. The failures have left subscribers in the affected regions without access to BlackBerry’s instant messaging service, e-mail and the Web.

RIM said Wednesday night that it had restored all those services to customers in the United States, but that it was investigating delays in its messaging service.

Wednesday’s hit could not have come at a worse time for RIM, which is fending off a growing crowd of agitated investors calling on the company to explore strategic options and new leadership. Shares of the company have fallen nearly 60 percent this year as smartphone buyers increasingly choose Android phones or iPhones. On Wednesday, news of the spreading network problems caused shares of RIM to dip even lower, falling more than 2 percent to close at $23.88.

Analysts say that RIM was battling to restore more than service to the millions faced with malfunctioning BlackBerry cellphone service. The company was also fighting for its foothold in a rapidly changing industry.

“It’s symbolic of what’s going on at the company,” said Colin Gillis, an analyst at BGC partners who follows the telecom industry. “It’s a bloodbath.”

The Waterloo, Ontario, company’s grasp on the global smartphone market has steadily declined over the last few years. In 2008, the company commanded 46 percent of the market share for mobile devices around the world, according to data from IDC, a research firm. But by the first half of 2011, that hold had weakened under the surging popularity of the products from rivals, sliding to 12 percent. The company had hoped to revive its business and dazzle consumers with the BlackBerry PlayBook, a 7-inch touch-screen tablet, but the device has yet to gain traction among a broad audience.

At the same time, dozens of sleek new Android devices are arriving on store shelves in time for the holiday season and Apple is releasing the latest version of the iPhone on Friday.

On Wednesday, in a conference call to address the problems, David Yach, the chief technology officer for software at RIM, said that the company did not find any traces of a security breach. Instead, Mr. Yach said that a switch that linked its internal network to the Internet had failed to function properly. Backup systems designed to support the infrastructure in such instances also failed to work properly, and a backlog of unsent messages began to pile up, choking the system and knocking other portions of the infrastructure offline, he said.

“We have global teams working around the clock on this,” he said. “Our top priority is to return services to our customers.”

By late Wednesday afternoon, some BlackBerry owners were reporting that service had returned, but Research in Motion executives did not say when they expected normal service.

Ken Dulaney, an analyst with Gartner, said that the biggest remaining question was whether the recent hiccups would prompt current BlackBerry owners to switch to other handsets. “Wireless access has become mission-critical, and people depend on it,” he said. “Any kind of outage is a serious problem.”

Frustration erupted on social media sites like Twitter and online forums that cater to the owners of BlackBerry devices. “Uugh. If I don’t get back to you today, this is why. BlackBerry outage appears to be spreading,” a user named Diana_Knight posted to Twitter on Wednesday.

On CrackBerry.com, a popular forum for BlackBerry owners, a thread called “Enough is Enough” had attracted thousands of views and hundreds of comments by Wednesday afternoon. “This is it. This is the boiling point. Someone has to go over to Waterloo and slap those in charge at RIM,” wrote a user going by the name BlackLion15.

Such failures are not rare for RIM. Last month, BlackBerry’s popular messaging service crashed for several hours in parts of Latin America and Canada.

Because RIM sends its data through its own servers, any disruptions are felt by larger swaths of users than for other handset makers. That can be infuriating for wireless carriers who are helpless at the annoyances of their customers using BlackBerrys on their network.

Representatives for Verizon, ATT and Deutsche Telekom, all of whom sell BlackBerry phones, declined to comment, deferring to RIM to address the problem.

By Wednesday morning, Wall Street was alight with e-mails from tech departments notifying employees of the problem. Bankers’ meetings fell through when attendees couldn’t look up the locations. Employees were reduced to leaving voice mail messages.

The RIM failure coincided with a major wireless industry conference in San Diego, where many companies that carry RIM’s traffic complained of getting little or no information about just what had gone wrong or how long it would take to fix. Others were less concerned about the industry than their own communications. “With this outage, people will say enough is enough.“ said Frank Nein, an industry analyst with 9Sight2020, who said he had met with representatives of RIM Tuesday. “And they didn’t have any answers about the network. They didn’t have any decent response to all these consumer devices coming into their turf.”

Mr. Yach said that the company was not currently exploring options such as compensating customers for the period of time their services were offline.

“Our priority is getting the service back up and running,” he said. “At the end of the day, that’s what is going to make our customers the happiest.” A few financial professionals saw a small silver lining on Wednesday. Alex Maloney, a director at Perkins Fund Marketing, a placement agent for hedge funds, said the service interruption was a nice vacation from gloomy e-mails.

“This is not necessarily the worst time for an outage,” he said. “It’s not like people are getting a whole lot of positive e-mails this day, given the turmoil in the financial markets.”

Quentin Hardy and Evelyn M. Rusli contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=5a28dcbdc28bcd2a1e5f27aaf0df15a2

DealBook: Morgan Tries to Quell Rumors About Its Holdings

Jin Lee/Bloomberg NewsJames Gorman, chief of Morgan Stanley, tried to address rumors about the company’s stock.

Morgan Stanley executives are battling a daily barrage of rumors and nay-saying to try to stem a sharp slide in the company’s stock.

It is a war that is being fought in large part in the shadows: against anonymous blogs and market whispers, but also against undefined fears about exposure to troubled European banks. While those worries are common to all the big Wall Street banks, Morgan Stanley, as the smallest, is perhaps the most vulnerable among them.

In response, Morgan Stanley executives have been rallying employees and talking to the company’s biggest shareholders. The campaign culminated late on Monday, with the Mitsubishi UFJ Financial Group, which owns approximately 22 percent of Morgan Stanley, publicly reaffirming its support for the company.

The push may have helped on Tuesday. Shares of Morgan Stanley rose 12.4 percent, after falling nearly 29 percent since the beginning of September. Morgan and other banks were primarily buoyed on Tuesday by a suggestion that European officials would look at bank recapitalizations.

Nonetheless, there has been a bloodbath in bank stocks. Morgan Stanley is down 48.5 percent for the year; Goldman Sachs has fallen 44 percent; and Bank of America is off about 57 percent. And the cost of insuring Morgan Stanley’s debt for five years through credit-default swaps, though it eased on Tuesday, remains at levels that were seen during the financial crisis.

Morgan Stanley’s war-roomlike approach to market volatility highlights the difficulties of stamping out rumors in a world of instant, and often anonymous, information.

Its latest round of troubles began on Friday morning before the markets opened at 9:30 a.m. Zero Hedge, a well-read and controversial financial blog, linked to a Bloomberg News article that noted Morgan’s credit-default swap spreads had been widening. The Zero Hedge post also directed readers to a previous Zero Hedge article that pegged Morgan Stanley’s net exposure to French banks at $39 billion, about $12 billion more than the bank’s current market capitalization, reigniting fears about its exposure.

It was a potent cocktail of information. The company’s stock opened down more than 3 percent, prompting a flood of calls to Morgan’s investor relations and press offices.

Calling Zero Hedge for damage control was not an option. The post was written by an anonymous blogger who goes by the name of “Tyler Durden,” a character in the movie “The Fight Club,” and the Web site does not give readers a way to readily reach its writers.

Adding to Morgan Stanley’s woes, Friday was the last day of Morgan Stanley’s third quarter. The company is set to release its earnings in a few weeks, and securities laws limit what it can say about its financial condition. Unable to reach Zero Hedge, Morgan Stanley’s investor relations department went into overdrive, quickly pulling together talking points for callers that were circulated to both media and investor relations staff members.

According to the talking points, reviewed by The New York Times, the numbers cited by Zero Hedge “represent gross asset positions and thus do not reflect the benefit of collateral or other hedges and protection, and the more relevant exposure to consider is the net exposure.”

So what is its net exposure? The company was limited in what it could say because of the pending earnings announcement. To address this point, staff members were told to direct callers to pre-existing stock research. “Analysts estimate that the actual net exposure is meaningfully lower,” the talking points read.

In particular, they cited a recent report by Brad Hintz, an analyst with Sanford C. Bernstein Company, who estimated that Morgan’s “total risk to France and its banks is less than $2 billion net of collateral and hedges.”

Zero Hedge could not be reached for comment.

Despite Morgan Stanley’s efforts, the stock ended on Friday down about 10 percent, at $13.51, its lowest close since the fall of 2008 and the depth of the financial crisis. The stock price was particularly frustrating to James P. Gorman, the company’s chief executive since early 2010. He has been leading the effort to rebuild the company; he even bought 100,000 shares of Morgan Stanley in early August at approximately $20 a share.

On Friday, Mr. Gorman shared his concerns with senior executives at Mitsubishi, conversations that culminated with discussions over the weekend between Mr. Gorman and Nobuyuki Hirano, his counterpart at the Japanese bank. The two men discussed the market rumors, concurring that they ran contrary to what they felt was going on in the market, said two people briefed on the conversation.

The company is expected to report third-quarter results in two weeks. Those results, these people said, are solid in light of the recent stock market rout. Analysts polled by Thomson Reuters estimated that the bank would report a profit of 36 cents a share.

Mr. Gorman and Mr. Hirano agreed that it would be helpful if Mitsubishi issued a news release expressing its support. That did not come, however, until Monday after the close.

Early on Monday Mr. Gorman decided to speak out himself. “In fragile markets, where fear triumphs over common sense, these things are bound to happen. It is easy to respond to the rumor of the day, but that is not usually productive,” he wrote in a note to employees. “Instead we should let balanced third parties do their own analysis and let the facts speak.”

On Monday, despite Mr. Gorman’s efforts, the company’s stock tumbled 7.7 percent.

Six minutes after the close, Mitsubishi issued its statement. “In response to recent market volatility M.U.F.G. wishes to reiterate that we are firmly committed to our long-term strategic alliance with Morgan Stanley. The special relationship we have formed remains core to our global business strategy.”

Initially, the statement seemed to have little effect on the stock. The cost to insure Morgan Stanley’s bank debt with credit-default swaps on its debt continued to rise Tuesday morning, but then fell back, according to Markit, a financial information company. Its shares closed at $14.01, up $1.54, or more than 12 percent.

“Mitsubishi’s announcement was the equivalent of a Japanese firm saying you are part of the family,” Mr. Hintz said.

Article source: http://feeds.nytimes.com/click.phdo?i=029b0b6887c80c81a8de4b3045403923

Hiccups in BlackBerry Service Spread; Five Continents Affected

DealBook: Morgan Tries to Quell Rumors About Its Holdings

Recent News

Partners